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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
10-K
Annual Report Pursuant to Section 13 of Section 15(d)
of the Securities Exchange Act of 1934
For the year ended December 31, 1994
Commission File No. 0-18033
EXABYTE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-0988566
(State of Incorporation) (IRS Employer Identification No.)
1685 38th Street
Boulder, Colorado 80301
(Address of principal executive offices, including zip code)
Area Code(303) 442-4333
(Registrant's Telephone Number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past ninety days.
Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this form 10-K. (X)
The approximate aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 10, 1995 was $318,057,284 based
on the closing sale price on such date(a). The aggregate number of shares of
Common Stock outstanding on March 10, 1995 was 21,669,150.
Document incorporated by reference: Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held April 28, 1995: Part III, Items 10, 11, 12,
and 13.
(a) Excludes 2,959,898 shares of Common Stock held by directors, executive
officers and shareholders whose ownership exceeds ten percent of the Common
Stock outstanding at March 10, 1995. Exclusion of shares held by any person
should not be construed to indicate that such person possesses the power,
direct or indirect, to direct or cause the direction of the management or
policies of registrant, or that such person is controlled by or under common
control with the registrant.
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PART I
Item 1.
BUSINESS
THE COMPANY
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Exabyte Corporation ("Exabyte" or the "Company") designs, develops,
manufactures and markets tape subsystems and robotic tape libraries for data
storage applications. The Company's tape subsystem offerings are based on 8mm
helical scan, 4mm helical scan and quarter-inch linear technologies. The
Company's early strategy was to capitalize on its proprietary adaptation of
8mm helical scan recording technology to provide highly reliable,
cost-effective small form factor tape subsystems with leading-edge capacity
and superior performance characteristics. Subsequently, the Company expanded
its helical scan product offerings by introducing 4mm cartridge tape
subsystems based upon technology it acquired in 1992 and minicartridge
products based upon quarter-inch linear technology it acquired in 1993. The
Company's various robotic tape libraries store and retrieve multiple media
cartridges and incorporate the Company's cartridge tape subsystems. The
Company also sells recording media and cleaning cartridges.
The Company's strategic focus is the market for information storage and
retrieval tape subsystems for workstations, midrange computer systems,
networks, and personal computers, particularly for data backup and archival
applications. As the need for data backup and archival storage increases,
computer manufacturers, system integrators and value-added resellers require
a variety of products with varying price, performance, capacity and
form-factor characteristics. The Company offers or intends to offer a number
of products to address a broad range of these requirements.
The Company markets its tape subsystems and robotic tape libraries principally
to Original Equipment Manufacturers ("OEMs"), Value-Added Resellers ("VARs"),
system integrators and distributors. Among Exabyte's OEM customers are
ATT/GIS, Bull S.A., Control Data, Data General, DEC, Hewlett-Packard, IBM,
ICL, Intel, Intergraph, Sequent, Siemens Nixdorf, Silicon Graphics, Sun
Microsystems and Unisys. Among the Company's distribution customers are
Anthem, Arrow, Avnet, Consan, Gates/FA, Ingram Micro, Intelligent Electronics,
Merisel, Micro Age, and Tech Data. See "Business--Marketing and Customers."
In October 1994, the Company acquired a division of Grundig A.G. to support the
development of an announced 8mm helical scan product. See "Business--Research
and Development."
Exabyte was incorporated in June 1985 under the laws of the State of Delaware.
RISK FACTORS
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High technology companies, such as Exabyte, are subject to numerous risks and
uncertainties. The following risk factors should be carefully considered in
the evaluation of the Company, its business and its investment value.
PRODUCT DEVELOPMENT; MAMMOTH
The Company participates in an industry that is subject to rapid technological
change. The Company believes that its future success will depend upon its
ability to apply and extend its technology and to continue to develop reliable
tape subsystems and robotic tape libraries with competitive price performance
and quality characteristics. Accordingly, Exabyte's ability to compete
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successfully depends upon continued enhancements of its existing products and
the development on a timely basis of new products that meet the changing needs
of users. The Company has experienced delays from time to time in completing
product development efforts in accordance with internal development schedules.
See "Business--Business Strategy and Products." In the future, the Company may
encounter difficulties that could delay or prevent other product development.
A significant portion of the Company's research and development is directed at
the introduction of the announced 8mm Mammoth product. See "Business--
Research and Development." The announced Mammoth product incorporates a
mechanical deck assembly that is to be designed and developed by the Company.
The Company has never before undertaken the design, development or manufacture
of an 8mm mechanical deck assembly and may, in the future, experience delays in
the development and manufacture of this announced product. The announced
Mammoth product requires the successful development of a number of critical
supporting components. The Company has engaged a number of third parties to
develop several critical components of the announced Mammoth product. There
can be no assurance that the development of the Mammoth product or components
by the Company or by such third parties will be successful or, if successful,
will be completed on a timely or cost-effective basis. The introduction of the
Mammoth product also requires the availability of advanced media from Sony
Corporation ("Sony"), a current competitor of the Company. See "Business--
Manufacturing" and "Business--Competition." The inability to design, develop
and introduce the Mammoth product on a timely basis would have a material
adverse effect on the Company's results of operations and would also adversely
affect the Company's competitive position with respect to other product
offerings.
DEPENDENCE ON KEY VENDORS; SONY
The Company's ability to maintain cost-effective manufacturing volume depends
upon uninterrupted access to high quality components in required volumes and
at competitive prices. The Company's 8mm mechanical tape decks and 4mm drum
assemblies are currently procured from a single source, Sony. While the
Company has a contract with Sony for the supply of the 8mm decks, there can
be no assurance either that the supply of decks will continue or that prices
will remain at their current levels. In addition, the Company expects that
Sony will be the sole supplier of advanced media for the Company's announced
Mammoth product. See "Business--Manufacturing." Sony's 4mm tape offerings
currently compete directly with the Company's 4mm tape subsystem offerings
and the Company believes it is possible that Sony may introduce competitive
8mm tape drive subsystems. Sony's competitive position may adversely affect
the Company's ability to procure 8mm mechanical decks and tape media at
required volumes and at competitive prices. See "Business--Manufacturing--
Sony Tape Deck Agreements." While there are other manufacturers of 8mm decks,
the customization effort required to make these decks suitable for the
Company's products would require many months of effort. There can be no
assurance that such effort would be successful or, even if successful, that it
would not result in a significant delay in the ability of the Company to ship
its products. The Company may in the future engage other third parties in the
joint development of products or components and thereby subject the Company to
other supply or technology dependencies.
In addition to its dependence on Sony, the Company relies upon other sole
source vendors for certain critical components, including, but not limited to,
printed circuit boards, semiconductor circuits and read/write heads. The
Company has not executed master purchase agreements with many of its sole
source vendors and conducts business with such vendors on a purchase order
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basis. The Company's reliance on these and other sole source vendors involves
several risks, including the possibility of a shortage of certain key
components and reduced control over delivery schedules, manufacturing yields,
quality and costs. The Company has, on occasion, experienced problems with
the quality of and interruptions in the supply of sole source components
although, to date, no such quality problem or interruption has had a material
effect on the Company's results of operations. In the event of yield,
quality, delivery or supply problems with any of these vendors in the future,
the Company could be forced to delay shipments of its products, which would
have a material adverse effect on the Company's results of operations.
See "Business--Manufacturing."
FLUCTUATIONS IN QUARTERLY RESULTS
The Company's results can fluctuate substantially from quarter to quarter for
various reasons. For example, the markets served by the Company are subject
to market patterns, which may or may not be discernible by the Company, and a
slowdown in the demand for workstations, midrange computer systems, networks
and personal computers could have a significant effect on the demand for the
Company's products in any given period. The Company has experienced delays
in receipt of purchase orders and, on occasion, anticipated purchase orders
have been rescheduled or have not materialized due to changes in customer
requirements. In the future, the Company's customers may cancel or delay
purchase orders for a variety of reasons, including rescheduling of new
product introductions, changes in their inventory practices or forecasted
demand, general economic conditions affecting the computer market, new product
announcements by the Company or others, quality or reliability problems
related to the Company's products, or selection of competitive tape subsystem
manufacturers as alternate sources of supply. The Company's operations have
in the past and may in the future reflect substantial fluctuations from period
to period as a consequence of such industry patterns, general economic
conditions affecting the timing of orders from customers as well as other
factors discussed herein. In particular, the Company's ability to forecast
sales to distributors and VARs is especially limited as such customers
typically provide the Company with relatively short order lead times. See
"Business--Marketing and Customers." As a result, the Company must carefully
manage inventories to levels necessary to meet changing patterns of product
demand, product transitions and new product introductions. Inaccuracies in
demand forecasts have resulted in the past, and may result in the future, in
either insufficient or excessive inventories and disproportionate overhead
expenses. Excessive inventories could additionally result in inventory
write-offs which could have a material adverse effect on the Company's results
of operations. In addition, Exabyte periodically evaluates its current and
announced products in terms of the changing needs of the market for such
products. There can be no assurance that such evaluation will not result in
the determination by the Company to discontinue the offer of any current or
unannounced product. The discontinuance of one or more current or announced
products may result in the write-off of inventory, tooling, and other assets
associated with such discontinued products and such write-off could have a
material adverse effect on the Company's results of operations. See
"Business--Business Strategy and Products."
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has historically been, and is
expected to continue to be, extremely volatile. Any shortfall in the
Company's operating results relative to analyst expectations would have an
immediate and significant impact on the market price of the Company's Common
Stock. In addition, other factors including, without limitation, new product
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announcements by the Company's competitors and general conditions in the
computer market could have a significant impact on the market price of the
Company's Common Stock. The stock market has periodically experienced extreme
price fluctuations, which have particularly affected the market prices for
many high technology companies, including the Company, and which have often
been unrelated to the operating performance of the specific companies.
COMPETITION
The tape storage market is highly competitive and the Company expects
competition in the markets for tape subsystems and libraries to increase.
Numerous companies are engaged in the research, development and
commercialization of data storage products, including certain computer
manufacturers, such as IBM and Hewlett-Packard, that incorporate their own
tape storage products in their systems. Competition has in the past resulted
and is expected in the future to result in price erosion with respect to the
Company's products.
To date, the Company's principal competition in the tape subsystem market
has come from companies offering 4mm data storage products using helical scan
technology, as well as products based on linear tape technologies, such as
quarter-inch cartridge and half-inch cartridge, including digital linear tape
("DLT"). Several of these vendors have introduced or announced, or are
expected to announce, tape storage products with increased transfer rates and
greater capacities. If these new products are successfully introduced, they
could represent a more significant competitive challenge to the Company in
the form of loss of business, pricing pressure and otherwise. Significant
competition could also develop from companies offering erasable and
non-erasable optical disks or other new technologies. In addition, other
companies may introduce competitive 8mm data storage subsystems in the future.
In addition, the Company expects that its library offerings will face increased
competition. See "Business--Competition."
Some of the Company's current and prospective competitors have significantly
greater financial, technical, manufacturing and marketing resources than the
Company. There can be no assurance that these competitors will not devote their
significantly greater resources to the aggressive marketing of storage products
using helical scan, quarter-inch cartridge, half-inch cartridge, optical or
other technologies. Sony, one of the Company's key suppliers, is also a
competitor to the Company. See "Business--Manufacturing--Sony Tape Deck
Agreements."
DEPENDENCE ON KEY CUSTOMERS
During 1994, IBM accounted for 17% of the Company's sales and the Company's
three largest customers accounted for an aggregate of 29% of the Company's
sales. These customers are not required to purchase a minimum quantity of
the Company's products and may cancel or reschedule orders without significant
penalty. The loss of one or more of these customers or substantial
cancellations by these customers could have a material adverse effect on the
Company's results of operations. In addition, significant rescheduling or
deferrals of orders by any of these customers could cause substantial
fluctuations in the Company's quarterly results. See "Business--Marketing and
Sales."
RISKS RELATED TO FOREIGN SOURCING
Because many of the Company's key components, as well as certain of the
Company's products, are currently manufactured in Japan, Germany, Malaysia and
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Singapore, the Company's results of operations may be materially affected by
fluctuations in currency exchange rates. A substantial portion of the
Company's products incorporate subassemblies and components purchased from
Japanese or other overseas suppliers, with the purchase of such subassemblies
and components denominated in yen or another foreign currency. The Company
may enter into foreign currency forward contracts which it uses to hedge the
purchase of certain inventory components from Japanese or other overseas
suppliers. See Note 1 to the Company's Consolidated Financial Statements.
The Company may additionally enter into contractual arrangements with its
overseas suppliers providing the Company with some limited sharing with such
suppliers of foreign exchange rate risks. The Company's international
procurement is also subject to certain other risks common to foreign operations
in general, including government regulation and import restrictions. In
particular, an adverse foreign exchange movement of the U.S. dollar versus
Japanese yen or other currency or the imposition of import restrictions or
tariffs by the United States government on products or components shipped from
Japan or from another country could have a material adverse effect on the
Company's results of operations. In addition, because of the Company's use of
components produced overseas, the sale of the Company's products to domestic
federal or state agencies may be restricted by limitations imposed by the Buy
American Act or the Trade Agreement Act.
RISKS RELATED TO FOREIGN SALES
Direct international sales accounted for approximately 27% of sales in 1994
and the Company currently expects that direct international sales will continue
to represent a significant portion of the Company's revenue. In addition,
many of the Company's domestic customers ship a significant portion of the
Company's purchased products to their customers overseas. Currently, a small
percentage of sales of the Company's products are denominated in local currency
and may thus be directly affected by foreign exchange rate fluctuations. In
addition, changes in the foreign exchange rates may affect the volume of sales
denominated in U.S. dollars to overseas customers as such an exchange rate
movement would impact local currency pricing. The Company's sales are also
subject to risks common to export activities, including government regulation,
tariffs and import restrictions. The Company's international sales must be
licensed by the Office of Export Administration of the U.S. Department of
Commerce. To date, the Company has experienced no material difficulties in
obtaining export licenses.
RISKS RELATED TO FOREIGN OPERATIONS
The functional currency applicable to the Company's subsidiaries located in
Scotland, Germany, Japan and other foreign countries is deemed to be the U.S.
dollar. See Note 1 to the Company's Consolidated Financial Statements. As a
result, the translation of the local currency assets and liabilities of such
subsidiaries will be affected by foreign exchange rate movement between the U.S.
dollar and the respective local currency and could have a material impact on
the Company's results of operations. In addition, the Company's foreign
operations are subject to the risks generally applicable to the conduct of
business in such countries.
THIRD PARTY PROPRIETARY RIGHTS
The Company has received in the past, and may receive in the future,
communications from third parties asserting that the Company's products
infringe the proprietary rights of third parties or seeking
indemnification against such infringement. There can be no assurance
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that any of these claims will not result in protracted and costly litigation.
While it may be necessary or desirable in the future to obtain licenses
relating to one or more of its products or relating to current or future
technologies, there can be no assurance that the Company will be able to do so
on commercially reasonable terms. The inability to obtain any required license
or to obtain such license on commercially reasonable terms could have a
material adverse effect on the Company's results of operations. The Company
is currently in discussion with IBM regarding the extent, if any, of the
Company's financial obligations under the Company's license from IBM of IBM's
IDRC, a data compression algorithm. IBM may assert that the Company has a
substantial payment obligation under such license. While it is the Company's
position that no material payments are due to IBM under the license, there can
be no assurance that the Company's position will ultimately prevail, in which
case there could be a payment obligation by the Company which could have a
material adverse effect on the Company's results of operations. See
"Business--Patents and Licenses."
MANAGEMENT OF BUSINESS TRANSITION
The Company is currently experiencing a period of rapid transition as it
addresses the complexities of developing and manufacturing multiple products
incorporating several different technologies sold through multiple marketing
channels. This transition has placed, and is expected to continue to place,
a significant strain on the Company's management, operational and financial
resources. In the previous three years, the Company has completed four
acquisitions: two to enable it to address the 4mm helical scan and
quarter-inch linear businesses; one to enable it to expand a marketing channel
(see "Business--Marketing and Customers"); and one to support the development
of the Mammoth product (see "Business--Research and Development"). The
Company's ability to effectively manage its transition and to integrate the
Company's recently acquired businesses will require it to continue to
implement and improve its operational, financial and information systems and
to expand, train and manage its employee base. In addition, the development
and manufacture of multiple product lines may affect the ability of the
Company to maintain acceptable product quality levels
REPLACEMENT OF INFORMATION SYSTEMS
The Company intends to replace in 1995 its information and business systems to
more effectively address the complexities of the Company's business. The
failure to successfully accomplish the replacement of these systems in a
timely manner or any failure otherwise to achieve the necessary levels of
information and business system support could have a material adverse effect
on the Company and its results of operations.
THIRD PARTY CONTRACT MANUFACTURING
The Company has entered into agreements with domestic and overseas third
parties to manufacture the Company's 4mm and quarter-inch drive subsystems as
well as components for a number of its products. The manufacture of the
Company's products by third parties may impair the Company's ability to
establish and maintain adequate product manufacturing design standards or
otherwise to achieve necessary product quality levels. The risks associated
with the transfer of product manufacturing to third parties are particularly
pronounced in the early stages of the manufacture of the product. A number of
the Company's third party manufacturing programs involve such early-stage
manufacturing. See "Business--Manufacturing."
The manufacture of the Company's products by third parties is based in part on
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technology that the Company believes to be proprietary. Exabyte may license
this technology to contract manufacturers to enable them to manufacture
products for the Company. There can be no assurance that such manufacturers
will abide by any use limitations or confidentiality restrictions in licenses
with the Company. In addition, any such manufacturers may develop process
technology related to the manufacture of the Company's products which it owns
independently or jointly with the Company, which would increase the Company's
reliance on such manufacturers or require the Company to obtain a license from
such manufacturers in order to have its products manufactured. There can be no
assurance that such licenses, if required, would be available on terms
acceptable to the Company, if at all. See "Business--Patents and Licenses."
ANTI-TAKEOVER PROVISIONS
The Company has taken a number of actions which could have the effect of
deterring a hostile takeover or otherwise delaying or preventing a change in
control that might result in payment to the Company's shareholders of a
premium for their shares or that might otherwise be beneficial to
shareholders. The Company has adopted a shareholder rights plan which could
cause substantial dilution to a person who attempts to acquire the Company on
terms not approved by the Company's Board of Directors. In addition, the
Company's Restated Certificate of Incorporation and By-laws contain provisions
which may have the effect of delaying or preventing a change in control.
These provisions include: (i) the classification of the Board of Directors;
(ii) the authority of the Board to issue Preferred Stock, without further
action by the shareholders, with such voting rights and other provisions as
the Board may determine; and (iii) the requirement that actions by
shareholders be taken at a meeting of shareholders and not by written consent.
SECURITIES SUITS
A large number of companies and company directors and officers in the high
technology industry have been subjected to suits in the form of class and
derivative actions filed in federal and state courts, generally alleging that
the defendants failed to adequately disclose certain risks. The Company's
results of operations may be materially affected by the legal costs of
defending, as well as any judgment or settlement arising out of, any such
actions against the Company in the future. In 1993, the Company successfully
defended a series of such class actions at an immaterial cost to the Company
and it is the Company's current belief there are no current or pending actions
against the Company.
INDUSTRY BACKGROUND
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Advances in microprocessor technology have resulted in the development of
compact, powerful and low-cost computers such as workstations, midrange
computer systems, networks and personal computers. These advances,
together with the increasing complexity of application software, the
expanding size of databases and the shift in the nature of data stored from
text to images, graphics and other storage-intensive applications, have driven
the demand for high-end disk drives with greater "on-line" storage capacity.
Because critical data stored on disk drives can be lost for many reasons,
including hardware failure and human error, convenient and timely access to
backup data has become essential. Magnetic tape subsystems have evolved as
the preferred method for backup primarily because the media is inexpensive and
may be easily removed and stored.
Prior to the introduction in 1987 of the Company's initial 8mm product, tape
technology and alternate forms of backup had not kept pace with the growth in
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disk drive capacity. As a result, computer users had to back up their files
with smaller capacity tape subsystems which took hours to record or restore
data, requiring attended operation to change the cartridges or reels. With
the trends toward larger networks, smaller computers, more storage-intensive
applications and high capacity disk drives, demand increased for larger
storage capacities, smaller form factors, higher reliability and greater speed.
Exabyte adapted 8mm helical scan technology, initially developed for video
applications, to address the need for high-capacity data storage and high data
transfer rates. The Company subsequently introduced 4mm helical scan
cartridge and quarter-inch linear tape subsystems to offer various price
performance options.
BUSINESS STRATEGY AND PRODUCTS
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The Company's strategic focus is the market for information storage and
retrieval tape subsystems for workstations, midrange computer systems,
networks and personal computers, particularly for data backup and archival
applications. As the need for data backup and archival storage increases,
computer manufacturers, system integrators and value-added resellers are
requiring a variety of products which vary as to price, performance,
capacity and form-factor characteristics. The Company's strategy is to
offer a number of products to address a broad range of these requirements.
(A pyramid diagram showing the relationships between the Company's
products and the overall tape storage market is included here. It is
adequately described below.)
The preceding diagram depicts the Company's generalized view of the market,
with the market for higher cost and performance subsystems reflected at the
peak. Exabyte's family of 8mm drive subsystems, with capacities ranging from
2.5 gigabytes to 14 gigabytes for current products (and up to 40 gigabytes
with data compression for the announced Mammoth product) addresses a large
portion of the higher end of the market, the remainder of which is largely
served by half-inch linear tape subsystems produced by others. The
Company's 4mm drive subsystem products, with drive capacities ranging from
two gigabytes to four gigabytes for current products (and up to eight
gigabytes for an announced product), address the requirement for smaller
form-factor drive subsystems with generally lower cost, capacity and
performance characteristics. A large portion of the 4mm market is directed
at local area network applications where the transfer rate requirements are
of relatively less importance than are other factors such as cost and capacity.
The Company also offers the quarter-inch DC-2000 minicartridge linear tape
subsystem, to address a portion of the lower end of the market. There can be
no assurance that any announced products referred to above will be successfully
developed, commercially available on a timely basis or achieve market
acceptance. See "Business--Business Strategy and Products--Tape Subsystem
Products--Announced Products."
The Company offers various robotic libraries which incorporate its 8mm and 4mm
drive subsystems to extend the capacity of these products. Exabyte's strategy
also includes the development of 4mm-based robotic libraries for use in
conjunction with drive subsystems manufactured by others. The Company also
offers consumables, including media and cleaning cartridges, and provides
service for its product lines.
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TAPE SUBSYSTEM PRODUCTS
Current Products
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The primary factors distinguishing the Company's tape subsystem product
offerings from one another are base technology, form factor, data capacity,
data transfer rate, and inclusion of the data compression feature. Base
technology is identified primarily by reference to the underlying media width.
The 8mm and 4mm subsystems are based upon helical scan technology. The
Company's quarter-inch products incorporate linear DC-2000 minicartridge tape
subsystem technology. Form factor refers to the physical size of the device
and reflects on the industry standard formats: 5 1/4" Full-High, 5 1/4"
Half-High or 3 1/2" form factors. The data capacity refers to the total amount
of data which may be stored on a single media cartridge. The data transfer
rate refers to the speed at which the data may be transferred to or from the
subsystem. Both data capacity and transfer rate are affected by the
successful application of data compression. The Company's 8mm data
compression is accomplished by incorporating the Improved Data Recording
Capabilities (IDRC), a compression algorithm licensed from IBM. See
"Business--Patents and Licenses." The data capacity and transfer rate
reflected in the accompanying table assumes a data compression ratio of two to
one. The actual compression ratio will vary depending upon the nature of the
data being compressed.
Transfer
Product ("EXB-") Technology Form Factor Capacity (GB) Rate (kB/s)
- --------------- ---------- ----------- ------------ ----------
8200 8mm 5 1/4" FH 2.5 246
8500/8500c 8mm 5 1/4" FH 5.0/10.0* 500/1,000*
8205XL 8mm 5 1/4" HH 3.5/7.0* 250/500*
8505XL 8mm 5 1/4" HH 7.0/14.0* 500/1,000*
4200/4200c 4mm 3 1/2" 2.0/4.0* 233/466*
2501/2501c Quarter-Inch 3 1/2" 1.0/2.0* 567/1,134*
_____________________
FH-- Full-high
HH-- Half-high
* -- Denotes that the number depends upon the successful application of data
compression.
The Company also offers stand-alone versions of the above products. Each such
version incorporates a power supply and is housed in a desktop enclosure.
These stand-alone products have received applicable regulatory approvals,
enabling the Company's customers to begin shipping immediately without
incurring their own design and regulatory agency approval delays.
Cartridge tape subsystems together accounted for 78%, 79% and 84% of revenue
in 1994, 1993 and 1992, respectively, and represented, by category, the
following percentages of revenue:
1994 1993 1992
---- ---- ----
Full-High 8mm 19% 46% 72%
Half-High 8mm 47% 24% 3%
Stand-Alone 8mm 6% 6% 9%
4mm 5% 2% 0%
Quarter-Inch 1% 1% 0%
---- ---- ----
TOTAL 78% 79% 84%
==== ==== ====
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Announced Products
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The Company has announced a number of new tape subsystem products, based upon
8mm, 4mm and quarter-inch technology.
Announced 8mm Products; Mammoth
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The Company has announced the Mammoth product, a next generation 5 1/4"
half-high 8mm tape subsystem, with an announced uncompressed capacity of 20
gigabytes and a transfer rate of three megabytes per second. The announced
Mammoth capacity and transfer rate will, typically, double with the
successful application of data compression. Mammoth is targeted for
application in the high-end workstation, midrange systems, network server and
mainframe markets. The Company currently expects to commence commercial
shipment of the Mammoth product in the second half of 1995, although there can
be no assurance that the Company will succeed in meeting this schedule or that
the product will achieve market acceptance. In particular, the timely
introduction of the Mammoth product is dependent upon the Company's ability
to successfully design and manufacture its own deck mechanism and other
subsystem components as well as the availability of advanced media. See
"Business--Research and Development" and "Business--Manufacturing." Any delay
in the commercial availability of Mammoth would have a material adverse effect
on the Company's result of operations and would adversely affect the Company's
competitive position with respect to other product offerings.
Announced 4mm Products
----------------------
The Company has announced 4mm products based upon the next generation of
digital data storage technology ("DDS-2"). The EXB-4402 has an announced
capacity double, and a transfer rate equal to, that of the current EXB-4200
product. Both the EXB-4402 and EXB-4402c, which includes data compression,
are targeted for lower cost and lower performance applications. The EXB-4404,
targeted for higher performance applications, has an announced capacity of
four gigabytes and a transfer rate of 388 kilobytes/second, both of which
would, typically, be doubled upon successful application of data compression.
The Company currently expects to commence commercial shipment of the EXB-4402
and EXB-4402c in the second quarter of 1995 and the EXB-4404 in the second half
of 1995, although there can be no assurance that the Company will succeed in
meeting this schedule or that the products will achieve market acceptance.
In particular, these dates of expected availability of the announced 4mm
products represent an approximate one year delay from the availability dates
that were expected by the Company at the beginning of 1994. This delay has
affected the Company's ability to compete in the market for 4mm products.
See "Business--Competition."
Announced Quarter-Inch Products
-------------------------------
The Company has announced the EXB-2502 and EXB-2502c as follow-on quarter-inch
products. The EXB-2502 has an announced compressed capacity of two gigabytes
and a transfer rate of 505 kilobytes per second. The EXB-2502c, incorporating
data compression, has an announced capacity and transfer rate double that of
the EXB-2502. The Company anticipates commercial shipment of the EXB-2502 and
of the EXB-2502c in the second quarter of 1995, although there can be no
assurance that the Company will succeed in meeting this schedule or that the
products will achieve market acceptance.
<PAGE> 12
The Company has also announced a quarter-inch product targeted for the
lower-end desktop market. The EXB-1500, with an announced uncompressed
capacity of 680 megabytes and a floppy interface, is designed for desktop
applications. The Company expects to commence shipment of the EXB-1500 in the
first half of 1995, although there can be no assurance that the Company will
succeed in meeting this schedule or that the product will achieve market
acceptance.
LIBRARIES
Current Library Products
- ------------------------
The Company offers a family of library subsystems which automate the storage
and retrieval of substantial amounts of data. Each library subsystem
incorporates one or more drive subsystems and multiple tape media cartridges.
The EXB-120, for example, enables up to 116 tape cartridges to be selected,
moved and loaded into any of four full-high 8mm tape subsystems. The
accompanying table lists the Company's current library offering in terms of
the technology, the form factor and the maximum number of drive subsystems
as well as the number of tape media cartridges which may be incorporated in
the library. The EXB-018 is the Company's first 4mm tape library offering
and is designed to incorporate 4mm tape drive subsystems offered by the
Company or by others.
Drive Max. # Max. #
Product ("EXB-") Technology Form Factor of Drives of Cartridges
- --------------- ---------- ----------- --------- -------------
10/10i/10e 8mm 5 1/4" FH 1 10
120 8mm 5 1/4" FH 4 116
60 8mm 5 1/4" FH 2 58
210 8mm 5 1/4" HH 2 10
440 8mm 5 1/4" HH 4 40
480 8mm 5 1/4" HH 4 80
10h 8mm 5 1/4" HH 1 10
018 4mm 3 1/2" 2 18
________________
FH -- Full-high
HH -- Half-high
Library products together accounted for 11%, 7% and 4% of revenue in 1994,
1993 and 1992, respectively.
Announced Library Product
- -------------------------
The Company has announced a 4mm tape library designed to incorporate the
announced EXB-4402 tape drive subsystems. The announced EXB-218 4mm library
is designed to incorporate up to two of the Company's announced EXB-4402
subsystems and 18 media cartridges. The Company anticipates commercial
availability of the EXB-218 in the second quarter of 1995, although there can
be no assurance that the Company will succeed in meeting this schedule or
that the product will achieve market acceptance.
The Company's various product offerings provide differing levels of profit
margin contribution to the Company's results of operations. Any shortfall in
the sale of the Company's higher-margin products, such as its library
offerings, would have a relatively greater impact on the Company's results of
operations.
<PAGE> 13
Exabyte periodically evaluates its current and announced products in terms
of the changing needs of the market for such products. There can be no
assurance that such evaluation will not result in the determination by the
Company to discontinue the offer of any current or announced product. The
discontinuance of one or more current or announced products may result in the
write-off of inventory, tooling, and other assets associated with such
discontinued products and such write-off could have material adverse effect on
the Company's results of operations.
The Company currently expects to discontinue in 1995 the production and sale
of the Company's entire line of 5 1/4" full-high tape subsystem and robotic
libraries incorporating such tape subsystems. The discontinuance of the
Company's full-high products is not expected to have a material adverse
impact on the Company's results of operations.
CONSUMABLES
The Company distributes 8mm, 4mm and quarter-inch data cartridges as well as
cleaning cartridges and data cartridge holders. The high-quality media,
produced by one or more third parties, is available in different lengths to
handle various data storage requirements. During 1994, 1993 and 1992, sales
of consumables accounted for approximately 8% of sales in each year.
SERVICE
The Company provides repair services domestically at its headquarters in
Boulder, Colorado and in Europe at its facility in Scotland. Service
accounted for approximately 4%, 4% and 3% of revenue in 1994, 1993 and 1992,
respectively. Customer service may also be provided by certain third party
depots under contract with the Company.
MARKETING AND CUSTOMERS
- -----------------------
The Company markets its tape subsystems principally to OEMs, VARs, system
integrators and distributors. The Company's initial sales of new products
are often made directly through its own sales force and through
distributors to VARs and system integrators, who are generally quicker to
evaluate, integrate and adopt new technology. However, as a new product
successfully completes the qualification process, OEM sales have generally
represented an increasing proportion of sales of that product.
VARs and system integrators often use the Company's tape subsystems to
upgrade various types of installed computer systems, including those
manufactured by IBM, Sun Microsystems and Digital Equipment Corporation,
to provide a more cost-effective tape backup solution. Some VARs package
the Company's tape subsystems into a stand-alone enclosure containing a
power supply and a printed circuit card with software for attachment to the
end user's system. System integrators often combine the Company's products
with other storage devices, such as single or multiple disk drives, to deliver
a value-added storage subsystem solution. Direct sales to VARs and system
integrators accounted for approximately 25%, 35% and 37% of sales in 1994,
1993 and 1992, respectively.
The Company's OEM customers incorporate the Company's drives as part of their
system offerings. The Company often works with OEMs early in the product
development cycle in order to have its tape subsystems designed into their
computing systems. The sales cycle for OEM customers involves extensive
product and system evaluation and integration and typically ranges from 6
to 18 months. An OEM sales cycle typically consists of general evaluation of
<PAGE> 14
the technology, qualification of the product specification, verification of
product compliance with product specification, integration of the product into
the customer's systems and announcement and volume shipment of the customer's
systems. Exabyte's product shipments are linked to the development cycle and
introduction to the OEM's new systems. Sales of all products to OEMs
represented 40%, 41% and 45% of sales in 1994, 1993 and 1992, respectively.
The Company also markets its products through a number of distributors to
OEMs, VARs, system integrators and end users. The various classes of the
Company's distributors, including industrial, commercial and technical
distributors as well as national resellers, provide differing levels of
marketing, technical and sales support. As a result, the Company often
supports its distributors by providing marketing and technical support
directly to the distributors' customers, thereby incurring certain additional
costs for such sales. Other costs and risks associated with the distribution
business include various inventory price protections and stock rotation
obligations undertaken by the Company. The distribution business is also
characterized by relatively short order lead-times which limit the Company's
ability to forecast sales to these customers. In 1993, the Company acquired
the assets and business of the former Tallgrass Technologies Corporation to
further the Company's effort to expand its distribution network. Sales to
distributors accounted for approximately 35%, 24% and 18% of sales in 1994,
1993 and 1992, respectively.
The Company markets its products overseas directly to OEMs and VARs and
through distributors to VARs, system integrators and end users. Each
major international market addressed by the Company is served by distributors
with rights to sell the Company's products in a country or group of countries.
The Company has established a wholly-owned subsidiary in The Netherlands to
provide sales and technical support throughout Europe. The Company has also
established a wholly-owned subsidiary in Scotland for the purpose of providing
product repair services to European customers as well as manufacturing
certain of the Company's products. See "Business--Manufacturing." Several of
the Company's independent overseas distributors provide repair services
directly or through their affiliates.
Direct international sales accounted for approximately 27%, 18% and 18% of
sales in 1994, 1993 and 1992, respectively. See Note 1 to the Company's
Consolidated Financial Statements. In addition, many of the Company's
domestic customers ship a significant portion of the Company's purchased
products to their customers overseas. Currently a small percentage of sales
of the Company's products are denominated in local currency and may thus be
directly affected by foreign exchange rate fluctuations. In addition, changes
in the foreign exchange rates may adversely affect the volume of sales
denominated in U.S. dollars to overseas customers as such an exchange rate
movement would impact local currency pricing. The Company's sales are also
subject to risks common to export activities, including government regulation,
tariffs and import restrictions. The Company's international sales must be
licensed by the Office of Export Administration of the U.S. Department of
Commerce. To date, the Company has experienced no material difficulties in
obtaining export licenses.
Kubota Corporation ("Kubota") and its affiliate, Nippon Systemhouse Co. Ltd.
("NSH"), have an exclusive right to market the EXB-8200 and the EXB-8500 in
Japan and a non-exclusive right to market those products in the remainder of
the Far East, Southeast Asia, Australia and New Zealand. The Company receives
royalties on sales of these products by Kubota or NSH. Kubota and NSH also
have certain rights to market other products of the Company in these
territories.
<PAGE> 15
IBM accounted for approximately 17%, 16% and 16% of sales in 1994, 1993 and
1992, respectively. Sun Microsystems accounted for approximately 10% of
sales during each of 1993 and 1992. No other customer accounted for 10%
or more of sales for any year during the three-year period ending December
31, 1994. In addition, during 1994, the Company's three largest customers
accounted for an aggregate of 29% of the Company's sales. These customers
are not required to purchase a minimum quantity of the Company's products and
may cancel or reschedule orders without significant penalty. The loss of one
or more of these customers or substantial cancellations by these customers
could have a material adverse effect on the Company's results of operations.
Significant rescheduling or deferrals of orders by any of these customers
could cause substantial fluctuation in the Company's quarterly results. In
addition, the Company's agreements with certain of its customers contain most
favored customer provisions which have resulted in the past, and may result in
the future, in price reductions or future pricing credits for such customers.
The Company believes that the demand for its tape subsystems and libraries is
substantially dependent upon the demand for workstations, midrange computer
systems, networks and personal computers. These markets are characterized by
market patterns, which may or may not be discernible by the Company, and a
slowdown in the demand for such products could have a material effect on the
demand for the Company's products in any given period. In addition, the
Company's OEM, VAR and distributor customers may cancel or delay purchase
orders for a variety of reasons, including rescheduling of new product
introductions, changes in their inventory practices or forecasted demand,
general economic conditions affecting the computer market, quality or
reliability problems related to the Company's products, or selection of
competitive tape subsystem manufacturers as alternate sources of supply.
Inaccuracies in demand forecasts in the environment in which the Company
operates can quickly result in either insufficient or excessive inventories
and disproportionate overhead expenses. The Company has experienced delays
in receipt of purchase orders and, on occasion, anticipated purchase orders
have been rescheduled or have not materialized due to changes in customer
requirements. In particular, any weakness in demand in the distribution and
VAR channels, which generally represent higher-margin sales, tends to have a
relatively greater impact on profitability and could have a material adverse
effect on the Company's results of operations.
MANUFACTURING
- -------------
Exabyte's manufacturing strategy relies upon key vendor relationships. The
Company believes that this strategy has provided it with significant financial
leverage by reducing its capital asset and inventory requirements.
The announced Mammoth product incorporates a mechanical deck that the
Company currently expects will be manufactured by the Company, rather
than be purchased from Sony or from another third party. The Company's
manufacturing experience in the past has been largely limited to the
assembly and testing of purchased components, and the Company has had
limited experience in other phases of manufacturing. In particular, the
Company has had only limited experience in the manufacture of mechanical
decks and there can be no assurance that the Company will be able to
manufacture products in commercial quantities at commercially acceptable cost.
Any inability by the Company to manufacture the Mammoth product in the
required volumes and at commercially acceptable cost would materially
impair the Company's competitive position and the ability of the Company to
achieve a profitable return on the Mammoth product and accordingly would have
<PAGE> 16
a material adverse effect on the Company's results of operations. In
addition, the manufacture of Mammoth may require the Company to increase its
capital assets and inventory requirements significantly, which could
adversely affect the Company's financial leverage.
The Company currently manufactures its 8mm, quarter-inch and library products
and configures its 4mm products at its facility in Boulder, Colorado. The
Company also manufactures or expects to manufacture certain of its products
at its facility in Falkirk, Scotland. In addition, the Company's Scottish
operation configures generic units of the Company's other product lines to
meet customer-specific requirements for its European customers. The Company
expects to significantly increase the size of its facility, as well as its
capital asset and inventory base, in Scotland to accommodate the Company's
expected increase in its manufacturing requirements there.
The Company has contracts with third parties to manufacture certain of the
Company's products. The Company's 4mm products are currently manufactured for
the Company by Solectron at Solectron's facility in Penang, Malaysia. The
Company currently anticipates that some or all of the Company's quarter-inch
products will be manufactured for the Company by CAM Technology Center P.T.E.,
Ltd. at CAM's facility in Singapore or elsewhere. The manufacture of the
Company's products by third parties may impair the Company's ability to
establish and maintain adequate product manufacturing design standards or
otherwise to achieve necessary product quality levels. The risks associated
with the transfer of product manufacturing to those or other third parties
are particularly pronounced in the early stages of the manufacture of the
product. A number of the Company's third party manufacturing programs involve
such early-stage manufacturing.
The inability of Exabyte to maintain cost-effective volume production of
high-quality products and to introduce announced products would have a
material adverse effect on the Company's results of operations. Exabyte
employs just-in-time manufacturing techniques with an emphasis on flexibility
and continuous flow. These techniques depend upon uninterrupted access to
high-quality components in required volumes and at competitive prices. Many
of these components, manufactured to the Company's specifications, are acquired
from sole sources. The principal custom components for the Company's current
tape subsystems are the 8mm tape decks and 4mm drum assemblies supplied by
Sony, circuit boards from Solectron and semiconductor circuits from various
suppliers. The Company has not executed master purchase agreements with many
of its sole-source vendors and conducts business with those vendors on a
purchase order basis. The Company's reliance on these and other sole-source
vendors involves several risks, including the possibility of a shortage of
certain key components and reduced control over delivery schedules,
manufacturing yields, quality and costs. The Company has, on occasion,
experienced problems with the quality of and interruptions in the supply of
sole-source components. To date, no such quality problems or interruptions
have had a material effect on the Company's results of operations. In the
event of yield, quality, delivery, supply or availability problems with any
of these vendors in the future, however, the Company could be forced to delay
shipments of its current products or the introduction of announced products,
which could have a material adverse effect on the Company's results of
operations.
In addition, the Company's ability to maintain its current product offerings
and to introduce its announced product offerings depends upon access to
high-quality tape media which is produced by a small number of vendors,
including Sony and 3M. The future introduction of several announced products,
including Mammoth, is dependent upon the availability of certain advanced tape
<PAGE> 17
media which is currently under development by Sony. In the event such
advanced tape media is not available, the Company could be forced to delay or
cancel the introduction of announced products, which could have a material
adverse effect on the Company's results of operations. See "Business--Risk
Factors-Dependence on Key Vendors; Sony."
The Company generally offers, depending upon product type, either a one-year
or two-year warranty on its products. The Company reserves for future
warranty expenses based on field experience.
SONY TAPE DECK AGREEMENTS
Sony has been the Company's sole supplier of the tape deck for the Company's
8mm tape subsystems since the commencement of product shipments in 1987.
The tape decks incorporated in the Company's 8mm products are customized to
meet the Company's specifications for data storage applications. The Company
and its wholly-owned Japanese subsidiary, Nihon Exabyte Corporation, entered
into a supply agreement with Sony providing for the supply by Sony of the
customized tape decks for the Company's full-high 8mm products. Effective
January 1, 1992, the same parties entered into a separate agreement for the
supply by Sony of jointly-developed decks for incorporation into the Company's
half-high 8mm products. The supply agreement for the Company's half-high
products provides that Sony will not sell to third parties certain
jointly-developed components. However, neither of the above supply agreements
provides the Company with rights to preclude Sony from selling to third
parties similar products or from incorporating such products into Sony's own
8mm product offerings. Further, the half-high supply agreement, as amended,
currently expires in March 1998, subject to automatic renewal on an annual
basis unless terminated by either party upon 180 days' written notice. There
can be no assurance that either of the supply agreements will continue beyond
the current term or that prices will remain at their current levels during
the current term of the agreement or thereafter. Sony's competitive position
may adversely affect the Company's ability to procure 8mm mechanical decks at
required volumes and at competitive prices. See "Business--Competition."
While there are other manufacturers of 8mm decks, the customization effort
required to make these decks suitable for the Company's products would
require many months of effort. There can be no assurance that such effort
would be successful or, even if successful, that it would not result in a
significant delay in the ability of the Company to ship its products.
KUBOTA MANUFACTURING AGREEMENT
Pursuant to agreements entered into in 1987 and renewed and amended in
December 1991 among the Company, Kubota and its affiliate, NSH, Kubota was
granted the exclusive right to manufacture the full-high 8mm products in the
Far East, Southeast Asia, Australia and New Zealand. The Company does not
believe Kubota is currently manufacturing full-high 8mm products.
FOREIGN EXCHANGE AND IMPORT RESTRICTIONS
- ----------------------------------------
Because many of the Company's key components, as well as certain of the
Company's products, are currently manufactured in Japan, Germany, Malaysia
and Singapore, the Company's results of operations may be materially
affected by fluctuations in currency exchange rates. A substantial portion
of the Company's products incorporate subassemblies and components purchased
from Japanese or other overseas suppliers, with such purchases denominated
in yen or another foreign currency. The Company may enter into foreign
currency forward contracts which it uses to hedge the purchase of certain
inventory components from Japanese or other overseas suppliers. See
<PAGE> 18
Note 1 to the Company's Consolidated Financial Statements. The Company may
additionally enter into contractual arrangements with its overseas suppliers
providing the Company with some limited sharing with such suppliers of foreign
exchange rate risks. The Company's international procurement is also subject
to certain other risks common to foreign operations in general, including
government regulation and import restrictions. In particular, an adverse
foreign exchange movement of the U.S. dollar versus Japanese yen or other
currency or the imposition of import restrictions or tariffs by the United
States government on products or components shipped from Japan or from another
country could have a material adverse effect on the Company's results of
operations. In addition, because of the Company's use of components produced
overseas, the sale of the Company's products to domestic federal or state
agencies may be restricted by limitations imposed by the Buy American Act or
the Trade Agreement Act.
The functional currency applicable to the Company's subsidiaries located in
Scotland, Germany, Japan and other foreign countries is deemed to be the U.S.
dollar. See Note 1 to the Company's Consolidated Financial Statements. As a
result, the translation of the local currency assets and liabilities of such
subsidiaries will be affected by foreign exchange rate movement between the
U.S. dollar and the respective local currency and could have a material impact
on the Company's results of operations. In addition, the Company's foreign
operations are subject to the risks generally applicable to the conduct of
business in such countries.
RESEARCH AND DEVELOPMENT
- ------------------------
The Company participates in an industry that is subject to rapid technological
change. The Company believes that its future success will depend upon its
ability to extend its technology and continue to develop highly reliable tape
subsystems with competitive price performance characteristics. The Company's
research and development efforts are principally directed toward the
development of new products with improved price performance characteristics.
In addition, the Company is engaged in the ongoing enhancement of its current
products.
To date, most of the Company's sales have been derived from products based on
8mm technology. There can be no assurance that other companies do not have or
will not develop technologies which are equivalent or superior to the
Company's technology or which render the Company's products obsolete or
non-competitive. Accordingly, Exabyte's ability to compete successfully
depends upon continued enhancements of its existing products and the
development on a timely basis of new products that meet the changing needs of
users. The Company has experienced delays from time to time in completing
product development efforts in accordance with internal development schedules
and, in the future, may encounter difficulties that could delay or prevent
product development.
A significant portion of the Company's research and development is directed
at the introduction of the announced 8mm Mammoth product. See "Business--
Business Strategy and Products." The announced Mammoth product incorporates
a mechanical deck assembly to be designed and developed by the Company. The
Company has never before undertaken the design, development or manufacture of
an 8mm mechanical deck assembly and thus may experience delays in the
development or manufacturing effort. The announced Mammoth product also
requires the successful development of a number of critical supporting
components. Among the critical components necessary for the successful
development of the Mammoth product are head scanner drum assemblies. The
development of the scanner assembly had been undertaken by a division of
<PAGE> 19
Grundig A.G. under contract with the Company. In October 1994, the Company
acquired that division from Grundig A.G. See Note 10 to the Company's
Consolidated Financial Statements. The Company now operates the acquired
division as a wholly-owned subsidiary, named Exabyte Magnetics GmbH.
Other critical components necessary for the successful development and
production of the Mammoth product include, without limitation, advanced
integrated circuits and dual motor reel heads. The Company has engaged a
number of third parties, including, without limitation, Philips and AT&T to
develop several critical components of the announced Mammoth product. In
addition, the successful introduction of Mammoth requires the availability of
advanced tape media. See "Business--Manufacturing." There can be no assurance
that the development by the Company or by such third parties of the Mammoth
product will be successful or, if successful, will be completed on a timely
basis. The inability to design, develop and introduce the Mammoth product or
other competitive new products on a timely basis would have a material adverse
effect on the Company's results of operations and would adversely affect the
Company's competitive position with respect to other product offerings.
The Company's research and development expenses were approximately $33.6
million, $31.6 million and $22.9 million in 1994, 1993 and 1992, respectively.
All of the Company's research and development costs are expensed as incurred.
The Company's engineering organization consisted of 253 persons as of January
30, 1995.
COMPETITION
- -----------
The tape storage market is intensely competitive and subject to rapid
technological change, as a number of manufacturers of alternative tape
technologies compete for a limited number of customers. Competition has
in the past resulted and is expected in the future to result in price erosion
with respect to the Company's products. The Company will face more significant
competitive challenges in the future in the form of loss of business, pricing
pressure and otherwise.
The Company believes that the principal competitive factors in this market are
storage capacity, data transfer rate, form factor, price, product quality and
reliability, timing of new product introductions, volume availability, and
customer support. Numerous companies are engaged in the research, development
and commercialization of data storage products, including certain computer
manufacturers that incorporate their own tape storage products in their
systems, such as IBM and Hewlett-Packard. Some of the Company's current and
potential competitors have significantly greater financial, technical and
marketing resources than those of the Company. The industry has experienced
a number of consolidations, such as the acquisition of Archive Corporation by
Conner Peripherals and of Colorado Memory Systems by Hewlett-Packard, which
have increased and may continue to increase the competitive pressures on the
Company. While the Company believes that it is currently the only
manufacturer of 8mm tape subsystems for data storage applications, the Company
believes it is possible that Sony may introduce a competitive 8mm tape drive.
See "Risk Factors--Dependence on Key Vendors; Sony." In addition, there can
be no assurance that other companies will not enter the 8mm market in the
future.
To date, the Company's principal competition in the tape subsystem market has
come from companies offering 4mm products using helical scan technology, as
well as products based on conventional tape technologies that record on
parallel tracks, such as quarter-inch and half-inch cartridge tape products.
The 4mm products typically offer the advantages of lower price and smaller
size, making 4mm products more readily adaptable to computing systems using
<PAGE> 20
smaller form factors. As a result, the Company's 8mm products have experienced
competition from 4mm-based products principally in the low-end file server
and workstation markets. In 1994, several competitors introduced 4mm products
based upon DDS-2, the next generation of 4mm technology, which has narrowed
the performance advantage of the Company's 8mm products over that of the 4mm
competitive offerings and has significantly increased competition. In
addition, the Company's 4mm products compete directly with the 4mm offerings
of other vendors, including Conner Peripherals, Hewlett-Packard and Rexon.
The Company's delay in the introduction of a 4mm product based upon DDS-2
technology has materially impacted its ability to compete with these offerings.
In addition, Sony, one of the Company's key suppliers, currently offers a
competitive tape storage product based on 4mm technology. There can be no
assurance that Sony's current efforts to produce and market competitive
products will not adversely affect Sony's supply of 8mm tape decks and
advanced tape media to the Company. See "Business--Manufacturing--Sony Tape
Deck Agreements."
At the low end of the market, the Company's quarter-inch products compete
directly with the quarter-inch products manufactured by Conner Peripherals,
Hewlett-Packard, Tandberg, Iomega and Rexon. In addition, 3M, the owner of
the basic quarter-inch technology, devotes substantial resources to the
development of further enhancements to quarter-inch products. The Company's
8mm and 4mm products also currently compete at the low end of the tape
storage market with products using conventional tape technologies, such as
quarter-inch products. Quarter-inch technology typically offers the advantage
over 8mm and 4mm products of low price as well as compatibility of new
products with the large installed base of earlier generation quarter-inch
products. As a result, quarter-inch drives have often been used to store data
for desktop personal computers and networks. While the Company's 8mm products
have historically had a capacity advantage over available products based on
quarter-inch technologies, several vendors of quarter-inch based products have
announced tape storage products with increased transfer rates and capacities
of up to 13 gigabytes and may announce tape storage products with even greater
capacities. If these higher capacity products are successfully introduced,
they could represent a more significant competitive challenge to the Company.
The Company also currently competes at the high end of its product line with
half-inch cartridge products. Such half-inch products offer significantly
higher capacity and data transfer rates than the Company's products. In
particular, the half-inch DLT technology, offered by Quantum, represents a
competitive threat to the Company's 8mm product line. Among the competitors
currently offering other half-inch cartridge products are Fujitsu, IBM,
Overland Data and StorageTek. In addition, other competitors may enter the
half-inch market in the future.
Significant competition could also develop from companies offering erasable
and non-erasable optical disks. In addition, other companies may introduce
in the future competitive storage subsystems based upon new technologies.
The Company's family of library products competes at the low end with 4mm
library products offered by Adic, Conner Peripherals, Qualstar and
Hewlett-Packard, at the midrange segment with products offered by IBM, Spectra
Logic and StorageTek, and at the high end with libraries offered by DEC,
IBM, Odetics and StorageTek. The Company may face significant competitive
challenges in the library market in the form of pricing pressure, loss of
business and otherwise. The Company's library offerings currently
represent higher-margin business to the Company and, as such, any shortfall in
the sale of these products would have a relatively greater impact on the
Company's results of operations.
<PAGE> 21
PATENTS AND LICENSES
- --------------------
The Company relies on a combination of patents, copyright and trade secret
protection, non-disclosure agreements and licensing arrangements to establish
and protect its proprietary rights. The Company owns 27 United States patents
relating to technologies and certain aspects of the Company's tape subsystems
and robotic tape libraries and has taken steps to establish certain protection
in Japan and Europe. In addition, the Company has a number of patent
applications pending in the United States and intends to file additional
applications for patents covering its products. There can be no assurance
that patents will issue from any of these pending applications or, if patents
do issue, that any claims allowed will be sufficiently broad to protect the
Company's technology. In addition, there can be no assurance that any patents
that may be issued to the Company will not be challenged, invalidated or
circumvented, or that any rights granted thereunder would provide
proprietary protection to the Company. Although the Company continues to
implement protective measures and intends to defend its proprietary rights,
policing unauthorized use of the Company's technology or products is difficult
and there can be no assurance that these measures will be successful. In
addition, the laws of certain foreign countries may not protect the Company's
proprietary rights to the same extent as do the laws of the United States.
The Company believes that, because of the rapid pace of technological
change in the tape storage industry, patent and trade secret protection are
less significant than factors such as the knowledge, ability and experience
of the Company's personnel, new product introductions and frequent product
enhancements.
The Company has received, and may receive in the future, communications from
third parties asserting that the Company's products infringe the proprietary
rights of third parties or seeking indemnification against such infringement.
There can be no assurance that any of these claims will not result in
protracted and costly litigation. While it may be necessary or desirable in
the future to obtain licenses relating to one or more of its products or
relating to current or future technologies, there can be no assurance that
the Company will be able to do so on commercially reasonable terms. The
inability to obtain any required license or to obtain such license on
commercially reasonable terms could have a material adverse effect on the
Company's results of operations. The Company is currently in discussion with
IBM regarding the extent, if any, of the Company's financial obligations under
the Company's license from IBM of IBM's IDRC, a data compression algorithm.
IBM may assert that the Company has a substantial payment obligation under such
license. While it is the Company's position that no material payments are
due to IBM under the license, there can be no assurance that the Company's
position will ultimately prevail, in which case there could be a payment
obligation by the Company which could have a material adverse effect on
the Company's results of operations.
The manufacture of the Company's products by third parties under contract
with the Company is based in part on technology that the Company believes
to be proprietary. See "Business--Manufacturing." Exabyte may license
this technology to contract manufacturers to enable them to manufacture
products for the Company. There can be no assurance that such
manufacturers will abide by any use limitations or confidentiality
restrictions in licenses with the Company. In addition, any such
manufacturer may develop process technology related to the manufacture of
the Company's products which it owns independently or jointly with the
Company, which would increase the Company's reliance on such manufacturer
<PAGE> 22
or require the Company to obtain a license from such manufacturer in order to
have its products manufactured. There can be no assurance that such license,
if required, would be available on terms acceptable to the Company, if at all.
The Company and Sony have entered into certain joint development agreements
with respect to tape decks and tape deck subassemblies. Under these
agreements, the Company and Sony have joint ownership of certain technology
related to these decks and subassemblies. See "Business--Research and
Development."
The Company has granted certain manufacturing and marketing licenses and
rights to Kubota and NSH with respect to certain of the Company's products.
See "Business--Manufacturing--Kubota Manufacturing Agreement" and
"Business--Marketing and Customers." In addition, the Company has granted
manufacturing licenses to certain customers which enable them to manufacture
and sell the Company's products upon the occurrence of certain events,
including the failure of the Company to perform its supply obligations.
BACKLOG
- -------
The Company's backlog as of December 31, 1994 and January 1, 1994 totaled
approximately $29.5 million and $37.0 million, respectively. The Company's
customers typically execute master purchase contracts with the Company.
These agreements generally do not require the customer to purchase minimum
quantities of the Company's products. Backlog consists of purchase orders
for which a delivery schedule within six months has been specified by the
customer. Lead times for the release of purchase orders depend upon the
scheduling practices of each customer, and the Company anticipates that the
rate of new orders will vary significantly from month to month. In addition,
the Company's actual shipments depend upon its production capacity and
component availability. Customers may cancel or reschedule orders without
significant penalty. For these reasons, the Company's backlog as of any
particular date may not be indicative of the Company's actual sales for any
succeeding fiscal period.
EMPLOYEES
- ---------
As of January 30, 1995, the Company had 1,113 full-time employees and 137
temporary or part-time employees for a total of 1,250 employees. Of the
Company's total employees, 253 were employed in engineering, 226 in sales,
marketing and technical support, 626 in manufacturing and service, and 145 in
finance and administration. None of the Company's employees is represented by
a labor union although Exabyte Magnetics GmbH is subject to an organized Works
Council. In addition, the Company has experienced no work stoppages and
believes that its employee relations are good.
The Company's success depends to a significant extent upon the ability to
attract, retain and motivate key engineering, marketing, sales, manufacturing,
support and executive personnel.
Item 2.
PROPERTIES
The Company's corporate offices, research and development and manufacturing
facilities are located in Boulder, Colorado, in leased buildings aggregating
approximately 370,000 square feet. The lease terms on these facilities expire
on various dates ranging from October 1995 to September 2004. The Company
believes that additional space will be available if needed for further
expansion. The Company also leases approximately 19,000 square feet in San
<PAGE> 23
Jose, California, 13,500 square feet in Ann Arbor, Michigan, and 20,500
square feet in Lenexa, Kansas.
The Company also leases a research and development office in Feurth (Germany);
a procurement office in Tokyo (Japan); a service and manufacturing facility
in Falkirk (Scotland); sales and support offices in Houten (The Netherlands);
Woodbridge, Ontario (Canada); Paris (France); Gwynedd (United Kingdom);
Frankfurt (Germany); Shanghai (China); and Singapore; and domestic sales and
support offices in Campbell and Mission Viejo, California; Tampa, Florida; Oak
Brook, Illinois; Lenexa, Kansas; Annapolis, Maryland; North Andover and
Walpole, Massachusetts; Montclair, New Jersey; Huntersville, North Carolina;
Beaverton, Oregon; Dallas and Houston, Texas.
Item 3.
LEGAL PROCEEDINGS
There are no material legal proceedings against the Company.
Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company and their ages as of March 15, 1995 are
as follows:
Peter D. Behrendt(1) 56 Chairman of the Board of Directors,
President and Chief Executive Officer
Mark W. Canright 44 Senior Vice President of Worldwide
Sales and Marketing
William L. Marriner 42 Executive Vice President, Finance and
Administration, Chief Financial Officer
and Treasurer
David L. Riegel 57 Executive Vice President of Operations and
Chief Operating Officer
(1) Member of the Stock Option Committee of the Board of Directors.
Mr. Peter D. Behrendt joined the Company as President, Chief Operating Officer
and a director in July 1987 and has served as the Company's Chief Executive
Officer since July 1990 and as the Company's Chairman of the Board since
January 1992. Prior to joining the Company, Mr. Behrendt held various
executive positions during 26 years with IBM, including director of Quality
and Product Assurance for the Information Systems and Communications Group as
well as Product Manager of the electronic typewriter business, and was
responsible for product and business planning for IBM's tape and disk
offerings.
Mr. William L. Marriner joined the Company in March 1987 as Vice President,
Finance and Administration and Chief Financial Officer and has served as
Treasurer since July 1990, Senior Vice President since July 1991 and
Executive Vice President since December 1994. Mr. Marriner served as
Secretary from July 1989 to February 1995. Prior to joining the Company,
Mr. Marriner held various positions at StorageTek from 1978 to 1987,
including Vice President of Pacific and Latin American Operations, Manager
of Business Planning and Administration for International Operations,
and Assistant to the President.
<PAGE> 24
Mr. Mark W. Canright joined Exabyte in 1987 as Western Region Sales Manager
and was promoted to Western Region Director in 1990, Vice President of
North American Sales in January 1992, Vice President of Worldwide Sales and
Support in July 1992 and Vice President of Worldwide Sales and Marketing in
January 1993. Mr. Canright has held the position of Senior Vice President of
Worldwide Sales and Marketing since January 1994. Prior to joining the
Company, Mr. Canright held various sales management positions at the Burroughs
Corporation, Data General and Convergent Technologies.
Mr. David L. Riegel joined the Company in November 1992 as Senior Vice
President of 8mm Operations. He became Senior Vice President of Operations in
July 1993 and has served as Executive Vice President and Chief Operating
Officer since December 1994. Prior to joining the Company, Mr. Riegel was
President and CEO of Bolder Technologies Corp. (previously Bolder Battery), a
venture-funded development stage company from May 1992 until November 1992.
Mr. Riegel served as President and CEO of PrairieTek Corp., a disk drive
manufacturer, from July 1990 until November 1992. PrairieTek Corp. filed for
protection under the Federal bankruptcy laws in August 1991. Mr. Riegel
previously served as the Vice President of Component Operations for Imprimus
Technology, a subsidiary of Control Data Corporation, from September 1987
until October 1989.
Executive officers serve at the discretion of the Board. There are no family
relationships among any of the directors and officers.
<PAGE> 25
PART II
Item 5.
MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded in the over-the-counter market and
quoted in the National Market System of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") under the symbol EXBT. The
following table shows, for the calendar quarters indicated, the high and low
closing prices of the Company's Common Stock as reported on the NASDAQ
National Market System.
Calendar Year High Low
- ------------- ----- -----
1993
First Quarter................................ 18-1/8 12-1/8
Second Quarter............................... 16-1/4 9-1/8
Third Quarter................................ 10-3/4 8-1/8
Fourth Quarter............................... 18-1/8 10-3/8
1994
First Quarter................................ 22-3/8 16-7/8
Second Quarter............................... 20-3/8 14-1/8
Third Quarter................................ 21-1/8 14-1/8
Fourth Quarter............................... 23-5/16 17-3/8
1995
First Quarter (through March 10, 1995)....... 20-7/8 17
At March 10, 1995, the Company had 813 holders of record of its Common Stock.
The Company has never paid cash dividends on its Common Stock. In addition,
the Company's bank line of credit prohibits the payment of dividends without
prior bank approval. The Company presently intends to retain any earnings for
use in its business and does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future.
<PAGE> 26
Item 6.
SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
The selected financial data set forth below with respect to the Company's
consolidated statements of operations for the fiscal years ended December 31,
1994, January 1, 1994, January 2, 1993, December 28, 1991 and December 29, 1990
and with respect to the consolidated balance sheets as of December 31, 1994,
January 1, 1994, January 2, 1993, December 28, 1991 and December 29, 1990 are
derived from consolidated financial statements audited by Price Waterhouse LLP,
independent accountants. The consolidated financial statements for the years
ended December 31, 1994, January 1, 1994 and January 2, 1993 are included
elsewhere in this report on Form 10-K and the selected financial data shown
below are qualified by reference to such financial statements.
<TABLE>
<CAPTION>
Fiscal Years Ended
Dec. 31, Jan. 1, Jan. 2, Dec. 28, Dec. 29,
Consolidated Statement of Operations Data: 1994 1994 1993 1991 1990
- ------------------------------------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales.................................... $381,844 $310,295 $287,444 $234,052 $170,286
Cost of goods sold........................... 257,365 219,053 183,380 139,751 96,915
-------- -------- -------- -------- --------
Gross profit................................. 124,479 91,242 104,064 94,301 73,371
Operating Expenses
Selling, general and administrative..... 42,560 37,169 30,790 24,704 18,716
Research and development................ 33,586 31,648 22,896 21,101 14,142
Purchased research and development(1)... 2,597 -- 13,469 -- --
-------- -------- -------- -------- --------
Income from operations....................... 45,736 22,425 36,909 48,496 40,513
Other income, net............................ 2,069 1,507 1,954 1,751 2,344
-------- -------- -------- -------- --------
Income before income taxes................... 47,805 23,932 38,863 50,247 42,857
Provision for income taxes................... (15,400) (7,750) (18,369) (18,050) (15,254)
-------- -------- -------- -------- --------
Net income................................... $32,405 $16,182 $20,494 $32,197 $27,603
======== ======== ======== ======== ========
Net income per share......................... $1.48 $0.76 $0.95 $1.51 $1.32
======== ======== ======== ======== ========
Common and common equivalent shares used in
the calculation of net income per
share(2)................................ 21,965 21,399 21,612 21,323 20,933
Consolidated Balance Sheet Data:
- -------------------------------
Working Capital.............................. $157,978 $129,693 $112,688 $ 96,879 $ 63,983
Total Assets................................. 242,765 197,307 183,066 149,940 100,927
Obligations under capital leases, excluding
current portion......................... 237 454 495 143 216
Stockholders' equity......................... 196,907 158,535 140,260 112,123 75,210
</TABLE>
(1) See Note 10 of Notes to Consolidated Financial Statements for an
explanation of the accounting for the R-Byte Inc. and Grundig Data
Scanner GmbH acquisitions.
(2) See Note 1 of Notes to Consolidated Financial Statements for an
explanation of the determination of shares used in computing net
income per share.
<PAGE> 27
Quarterly Results of Operations
- -------------------------------
The following table sets forth unaudited operating results for each quarter of
fiscal 1994 and fiscal 1993. This information has been prepared on the same
basis as the audited financial statements and, in the opinion of management,
contains all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement thereof. The operating results for any quarter
are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
Quarters Ended (Unaudited)
Dec. 31, Oct. 1, Jul. 2, Apr. 2,
1994 1994 1994 1994
------- ------- ------- -------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales.............................. $103,268 $99,001 $92,681 $86,894
Cost of goods sold..................... 68,535 66,443 62,863 59,524
-------- ------- ------- -------
Gross profit........................... 34,733 32,558 29,818 27,370
Selling, general and administrative.... 11,950 10,646 10,552 9,412
Research and development............... 9,165 8,671 8,133 7,617
Purchased research and development..... 2,597 -- -- --
-------- ------- ------- -------
Income from operations................. 11,021 13,241 11,133 10,341
Other income(expense), net............. 471 485 485 628
-------- ------- ------- -------
Income before income taxes............. 11,492 13,726 11,618 10,969
Provision for income taxes............. (2,328) (4,941) (4,182) (3,949)
-------- ------- ------- -------
Net income............................. $ 9,164 $ 8,785 $ 7,436 $ 7,020
======== ======= ======= =======
Net income per share................... $0.41 $0.40 $0.34 $0.32
======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
As a Percentage of Net Sales
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 66.4 67.1 67.8 68.5
-------- ------- ------- -------
Gross margin........................... 33.6 32.9 32.2 31.5
Selling, general and administrative.... 11.5 10.7 11.4 10.8
Research and development............... 8.9 8.8 8.8 8.8
Purchased research and development..... 2.5 -- -- --
-------- ------- ------- -------
Income from operations................. 10.7 13.4 12.0 11.9
Other income(expense), net............. 0.5 0.5 0.5 0.7
-------- ------- ------- -------
Income before income taxes............. 11.2 13.9 12.5 12.6
Provision for income taxes............. (2.3) (5.0) (4.5) (4.5)
-------- ------- ------- -------
Net income............................. 8.9% 8.9% 8.0% 8.1%
======== ======= ======= =======
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
Quarters Ended (Unaudited)
Jan. 1, Oct. 2, Jul. 3, Apr. 3,
1994 1993 1993 1993
------- ------- ------- -------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales.............................. $83,185 $75,141 $75,763 $76,206
Cost of goods sold..................... 56,536 54,784 56,002 51,731
-------- ------- ------- -------
Gross profit........................... 26,649 20,357 19,761 24,475
Selling, general and administrative.... 10,528 8,925 9,316 8,400
Research and development............... 8,261 7,674 8,135 7,578
Purchased research and development..... -- -- -- --
-------- ------- ------- -------
Income from operations................. 7,860 3,758 2,310 8,497
Other income(expense), net............. 552 (98) 233 820
-------- ------- ------- -------
Income before income taxes............. 8,412 3,660 2,543 9,317
Provision for income taxes............. (2,473) (1,039) (933) (3,305)
-------- ------- ------- -------
Net income............................. $ 5,939 $ 2,621 $ 1,610 $ 6,012
======== ======= ======= =======
Net income per share................... $0.28 $0.12 $0.08 $0.28
======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
As a Percentage of Net Sales
<S> <S> <S> <S> <S>
Net sales.............................. 100.0% 100.0% 100.0% 100.0%
Cost of goods sold..................... 68.0 72.9 73.9 67.9
-------- ------- ------- -------
Gross margin........................... 32.0 27.1 26.1 32.1
Selling, general and administrative.... 12.7 11.9 12.4 11.0
Research and development............... 9.9 10.2 10.7 9.9
Purchased research and development..... -- -- -- --
-------- ------- ------- -------
Income from operations................. 9.4 5.0 3.0 11.2
Other income(expense), net............. 0.7 (0.1) 0.3 1.0
-------- ------- ------- -------
Income before income taxes............. 10.1 4.9 3.3 12.2
Provision for income taxes............. (3.0) (1.4) (1.2) (4.3)
-------- ------- ------- -------
Net income............................. 7.1% 3.5% 2.1% 7.9%
======== ======= ======= =======
</TABLE>
<PAGE> 29
Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FISCAL YEAR 1994 COMPARED TO 1993
- ---------------------------------
The following table sets forth items in the Exabyte Corporation and
Subsidiaries (the "Company") Consolidated Statements of Operations for the
three years ended December 31, 1994, January 1, 1994, and January 2, 1993, as
a percentage of net sales.
<TABLE>
<CAPTION>
Fiscal Years
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Net sales................................... 100.0% 100.0% 100.0%
Cost of goods sold.......................... 67.4 70.6 63.8
----- ----- -----
Gross margin................................ 32.6 29.4 36.2
Operating expenses:
Selling, general and administrative....... 11.1 12.0 10.7
Research and development.................. 8.8 10.2 8.0
Purchased research and development........ 0.7 -- 4.7
----- ----- -----
Income from operations...................... 12.0 7.2 12.8
Other income, net........................... 0.5 0.5 0.7
----- ----- -----
Income before income taxes.................. 12.5 7.7 13.5
Provision for income taxes.................. (4.0) (2.5) (6.4)
----- ----- -----
Net income.................................. 8.5% 5.2% 7.1%
===== ===== =====
</TABLE>
The Company's net sales of $381.8 million for fiscal 1994 increased 23% from`
net sales of $310.3 million for 1993. This sales growth was primarily the
result of increases in the unit shipments of 8mm half-high drives, 4mm
drives, quarter-inch drives and libraries. Partially offsetting these
increases was a reduction in the unit volume shipments of 8mm full-high drives
as well as decreases in the average selling prices of all products.
During 1994, sales of the half-high EXB-8505 product increased to 43% of
sales from 22% in 1993. Sales of full-high products, the EXB-8200 and
EXB-8500, decreased to 5% and 14% of sales, respectively, from 14% and 32% in
1993. The decreased sales of full-high products reflect shifting customer
demand to the Company's half-high products. This shift is expected to
continue through fiscal 1995. Product sales as a percentage of total net
sales for the three-year period ending December 31, 1994, are set forth in the
following table:
<PAGE> 30
Product Mix Table
(As a percentage of net sales)
<TABLE>
<CAPTION>
Fiscal Years
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
8mm products:
EXB-8200....................... 5.1% 14.3% 37.0%
EXB-8500....................... 13.6 32.2 34.8
EXB-8205....................... 3.5 1.8 0.3
EXB-8505....................... 43.1 22.1 2.9
Stand-alone subsystems (for
above products)................ 6.5 6.1 9.2
EXB-10 and 210................. 7.5 5.0 3.0
EXB-120 and 60................. 3.1 2.1 0.9
4mm and quarter-inch cartridge products:
EXB-4200....................... 4.8 1.8 0.1
EXB-2501....................... 1.5 0.9 --
Consumables...................... 8.1 7.9 7.7
Service, spares and other........ 4.9 6.3 4.1
Sales allowances................. (1.7) (0.5) --
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
The relative customer mix during 1994 shifted more to distributors from
original equipment manufacturers ("OEMs") and value-added resellers ("VARs").
Distributors accounted for 35% of total sales in 1994 compared to 24% in 1993.
OEM sales represented 40% of total sales, down from 41% in 1993. VARs
accounted for 25% of total sales in 1994 compared to 35% in 1993. This shift
in customer mix for 1994 was the result of increased sales to existing
distributor accounts as well as the addition of several new distribution
customers.
The Company's gross margin increased to 32.6% of sales in 1994 compared to
29.4% in 1993. This increase in gross margin is due to an increased
percentage of sales to higher margin distribution customers and a change in
the sales mix to higher margin 8mm half-high and library products. The
Company currently expects continued price erosion on all of its products due
to competition in the storage peripherals market.
Selling, general and administrative expenses increased to $42.6 million in 1994
from $37.2 million in 1993. These expenses represented 11.1% of sales in 1994
compared to 12.0% in 1993. The increase in total expenditures can be
attributed to support costs of a higher sales level. The principal components
of these sales-related costs include salaries and benefits, sales commissions,
advertising and promotion expenses.
Research and development expenditures increased to $33.6 million in 1994 from
$31.6 million in 1993. These expenses represented 8.8% of sales in 1994
compared to 10.2% in 1993. The increase in absolute dollars is due to
expansion of the Company's product lines and includes expenses directed at cost
and performance improvements to the Company's existing products and
the development of recently announced as well as unannounced new products.
<PAGE> 31
The Company recorded "Purchased Research and Development" costs of
approximately $2.6 million related to the acquisition of Grundig Data Scanner
GmbH (now known as Exabyte Magnetics GmbH, or EMG) during the fourth quarter of
1994. This cost represented the excess of the acquisition price over the net
assets acquired. See Note 10 of Notes to Consolidated Financial Statements
for a further explanation of the accounting for the Grundig acquisition.
Other income, net, consisits primarily of interest income, royalty income,
interest expense, state franchise taxes and other miscellaneous items.
Interest income increased by $1.4 million in 1994 over 1993 due to higher
interest rates and the investment of larger cash balances in 1994. During
1994, the Company generated $241,000 in royalties from sales in Japan by
Nippon Systemhouse Co., Ltd. compared to $463,000 in 1993.
The provision for income taxes for 1994 decreased to 32.2% of income before
income taxes from 32.4% in 1993. See note 6 of Notes to the Consolidated
Financial Statements for a description of the factors which resulted in the
effective tax rates being lower than the statutory tax rate of 35%.
FISCAL YEAR 1993 COMPARED TO 1992
The Company's net sales of $310.3 million for fiscal 1993 increased 8% from
net sales of $287.4 million for 1992. This sales growth was the result of
increases in the unit volume shipments of 8mm half-high drives and 8mm
libraries, and of the addition of 4mm and quarter-inch cartridge products.
Partially offsetting these increases was a reduction in the unit volume
shipments of full-high drives as well as decreases in the average selling
prices of all products.
During 1993, sales of the half-high EXB-8505 product increased to 22% of
sales from 3% in 1992. Sales of the Company's initial product, the
EXB-8200, decreased to 14% of sales during 1993 compared to 37% in 1992.
Sales of the EXB-8500 product decreased slightly to 32% of sales in 1993 from
35% in 1992. The decrease in sales of the full-high EXB-8200 and EXB-8500
products was primarily due to shifting customer demand to the half-high
EXB-8505 tape subsystem.
The customer mix during 1993 shifted from OEMs and VARs to distributors. OEM
customers accounted for 41% of total 1993 sales compared to 45% in 1992. VARs
and system integrators contributed 35% of sales in 1993, compared to 37% in
1992. Sales to distributors increased to 24% of sales in 1993 compared to 18%
in 1992. This shift in customer mix for 1993 was primarily the result of
greater sales to existing distributor accounts as well as an expansion of the
Company's distribution channel through the addition of several new commercial
distributors.
The Company's gross margin decreased to 29.4% of sales in 1993 from 36.2% in
1992. The lower gross margin percentage was due principally to (1) a
year-over-year decrease in the average selling price of the Company's products
caused by competitive price pressures as well as committed price reductions on
sales to major OEM customers; (2) higher product costs for the Company's 8mm
drives as a result of the weakness of the U.S. dollar relative to the Japanese
yen during 1993; and (3) start-up costs associated with the increased
production of three new products (the EXB-2501, EXB-4200 and the EXB-10e).
<PAGE> 32
Selling, general and administrative expenses increased to $37.2 million in 1993
from $30.8 million in 1992. These expenses represented 12.0% of sales in 1993
compared to 10.7% in 1992. These increases were primarily the result of
additional personnel and other sales-related costs required to support several
new products as a result of the Company's three acquisitions in 1993 and 1992.
The principal components of these sales-related costs include salaries and
benefits, sales commissions, advertising and promotion expenses.
Research and development expenditures increased to $31.6 million in 1993 from
$22.9 million in 1992. These expenses represented 10.2% of sales in 1993
compared to 8.0% in 1992. These increases were primarily the result of
increased spending on new and unannounced products and the growth in the
Company's research and development staff due to recent acquisitions. Expenses
associated with research and development activity in 1993 were directed at
cost and performance improvements to the Company's existing products and the
development of recently announced as well as unannounced new products.
The Company had purchased research and development of approximately $13.5
million related to the acquisition of R-Byte Inc. ("R-Byte") during the third
quarter of 1992 which represented the excess of the acquisition purchase price
over the net assets acquired. See Note 10 of Notes to Consolidated Financial
Statements for a further explanation of the accounting for the R-Byte
acquisition.
Other income, net, consists primarily of interest income, royalty income,
interest expense, state franchise taxes and other miscellaneous items.
Interest income decreased by $946,000 in 1993 from 1992 due to lower interest
rates and the investment of lower cash balances in 1993. During 1993, the
Company generated $463,000 in royalties from sales by Nippon Systemhouse Co.,
Ltd. in the Far East compared to $301,000 in 1992.
The provision for income taxes for 1993 decreased to 32.4% of income before
income taxes from 35.1% in 1992 (excluding the non-tax-deductible purchased
research and development expense related to the R-Byte acquisition). The
decrease in the effective tax rate was primarily due to a higher research and
development tax credit earned in 1993 over 1992.
Effective as of the beginning of the Company's 1993 fiscal year, Statement of
Financial Accounting Standards ("FAS") No. 109, "Accounting for Income Taxes,"
was prospectively adopted. FAS No. 109 required the Company to change its
method of accounting for income taxes from the deferred method to the liability
method. The liability method requires the recognition of deferred tax assets
and liabilities for the expected tax consequences of temporary differences
between the tax bases of assets and liabilities and their reported amounts.
The cumulative effect of adopting FAS No. 109 was not material to the Company's
financial position or results of operations.
<PAGE> 33
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During 1994, the Company generated $26.4 million of cash from operating
activities, received $4.9 million from the issuance of common stock to Company
employees, expended $13.6 million for capital equipment, paid $0.3 million on
capital leases and paid approximately $3.1 million for the purchase of net
assets of Grundig Data Scanner GmbH. Together, these activities resulted in
an increase in the combined balance of cash and short-term investments of
$14.3 million to a year-ending balance of $80.3 million.
The Company's working capital increased to $158.0 million on December 31,
1994, from $129.7 million on January 1, 1994. The increase in working capital
was primarily the result of positive cash flow combined with an increase in
accounts receivable of $11.8 million due to the growth in sales and an
increase in inventories of $8.1 million.
The Company has a $15 million bank line of credit which expires April 30, 1995,
with borrowings under the line limited to 80% of eligible accounts receivable
plus 25% of eligible inventory (limited to $3,000,000). On December 31, 1994,
the amount available under the line was $15 million and no borrowings were
outstanding. Borrowings under the line of credit bear interest at the bank's
prime rate. The ability to borrow under this line of credit is dependent upon
the Company's adherence to a set of financial covenants, including the need to
be profitable on a quarterly basis. The Company is currently in compliance
with all such covenants.
The Company currently expects to make capital expenditures of approximately
$16 million during 1995. The Company believes its existing sources of
liquidity and funds expected to be generated from operations will provide
adequate cash to fund anticipated working capital and other cash requirements
through fiscal 1995.
<PAGE> 34
Item 8.
FINANCIAL STATEMENTS
Page
Report of Independent Accountants................................... 35
Consolidated Balance Sheets -
December 31, 1994 and January 1, 1994............................... 36
Consolidated Statements of Operations - for the years ended
December 31, 1994, January 1, 1994 and January 2, 1993.............. 37
Consolidated Statements of Changes in Stockholders' Equity -
for the years ended
December 31, 1994, January 1, 1994 and January 2, 1993.............. 38
Consolidated Statements of Cash Flows -
for the years ended
December 31, 1994, January 1, 1994 and January 2, 1993.............. 39-40
Notes to Consolidated Financial Statements.......................... 41-50
<PAGE>35
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Exabyte Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 52 present fairly, in all
material respects, the financial position of Exabyte Corporation and its
subsidiaries as of December 31, 1994 and January 1, 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Boulder, Colorado
January 17, 1995
<PAGE> 36
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS December 31, January 1,
1994 1994
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......... $ 46,233 $ 44,995
Short-term investments............. 34,111 21,000
Accounts receivable, net........... 64,940 53,141
Inventories........................ 48,236 40,180
Deferred income taxes.............. 7,329 7,575
Other current assets............... 2,750 1,120
-------- --------
Total current assets................. 203,599 168,011
-------- --------
Property and equipment, net.......... 29,166 24,977
Deferred income taxes................ 6,458 --
Other assets......................... 3,542 4,319
-------- --------
39,166 29,296
-------- --------
$242,765 $197,307
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................... $ 20,459 $ 19,669
Accrued liabilities................ 21,345 14,193
Accrued income taxes............... 3,600 4,159
Obligations under capital leases... 217 297
-------- --------
Total current liabilities............ 45,621 38,318
Long-term obligations under
capital leases................... 237 454
-------- --------
Commitments (Note 8).................
Stockholders' equity:
Preferred stock, $.001 par value;
14,000 shares authorized; no
shares issued and outstanding.... -- --
Common stock, $.001 par value;
50,000 shares authorized;
21,657 and 21,190 shares
issued........................... 22 21
Capital in excess of par value..... 57,208 51,242
Treasury stock, at cost, 15 shares. (9) (9)
Retained earnings.................. 139,686 107,281
-------- --------
Total stockholders' equity........... 196,907 158,535
-------- --------
$242,765 $197,307
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 37
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Years Ended
December 31, January 1, January 2,
1994 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net Sales............................ $381,844 $310,295 $287,444
Cost of goods sold................... 257,365 219,053 183,380
-------- -------- --------
Gross profit......................... 124,479 91,242 104,064
Operating expenses:
Selling, general and administrative.. 42,560 37,169 30,790
Research and development............. 33,586 31,648 22,896
Purchased research and development... 2,597 -- 13,469
-------- -------- --------
Income from operations............... 45,736 22,425 36,909
Other income, net.................... 2,069 1,507 1,954
-------- -------- --------
Income before income taxes........... 47,805 23,932 38,863
Provision for income taxes........... (15,400) (7,750) (18,369)
-------- -------- --------
Net income........................... $32,405 $16,182 $20,494
======== ======== ========
Net income per share................. $1.48 $0.76 $0.95
======== ======== ========
Common and common
equivalent shares used in the
calculation of net income
per share............................ 21,965 21,399 21,612
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 38
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except per share data)
<TABLE>
<CAPTION>
Common Stock Treasury Stock Capital in Excess Retained
Shares Amount Shares Amount of Par Value Other Earnings
------ ------ ------ ------ ------------ ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 28, 1991............. 20,345 $20 (13) $(6) $41,510 $(6) $70,605
Common stock options exercised ($.10
to $25.63 per share)................. 525 1 2,340
Common stock issued pursuant to the
Employee Stock Purchase Plan
($13.92 and $26.78 per share)........ 70 1,219
Treasury stock purchased............... (1) (3)
Amortization of deferred compensation.. 5
Tax effect of disqualifying
dispositions of common stock......... 4,081
Net income for the year................ 20,494
------ ---- ---- ---- --------- --- --------
Balance, January 2, 1993............... 20,940 21 (14) (9) 49,150 (1) 91,099
Common stock options exercised ($.10
to $16.88 per share)................. 163 891
Common stock issued pursuant to the
Employee Stock Purchase Plan
($8.61 per share).................... 87 755
Treasury stock purchased............... (1)
Amortization of deferred compensation.. 1
Tax effect of disqualifying
dispositions of common stock......... 446
Net income for the year................ 16,182
------ ---- ---- ---- --------- --- --------
Balance, January 1, 1994............... 21,190 21 (15) (9) 51,242 -- 107,281
Common stock options exercised ($.10
to $20.63 per share)................. 392 1 3,993
Common stock issued pursuant to the
Employee Stock Purchase Plan
($12.11 per share)................... 75 906
Tax effect of disqualifying
dispositions of common stock......... 1,067
Net income for the year................ 32,405
------ ---- ---- ---- --------- --- --------
Balance, December 31, 1994 ............ 21,657 $22 (15) $(9) $57,208 -- $139,686
====== ==== ==== ==== ========= === ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 39
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended
----------------------
December 31, January 1, January 2,
1994 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers............ $371,046 $301,978 $285,882
Cash received from related party........ -- 2,702 1,758
Cash paid to suppliers and employees.... (325,868) (236,680) (187,463)
Cash paid to related party.............. -- (31,792) (65,170)
Interest received....................... 2,433 1,264 2,222
Interest paid........................... (156) (159) (140)
Income taxes paid....................... (21,104) (9,334) (13,243)
Net cash provided by -------- -------- --------
operating activities............. 26,351 27,979 23,846
-------- -------- --------
Cash flows from investing activities:
Purchase of short-term
investments, net...................... (13,111) (4,050) (9,950)
Capital expenditures.................... (13,568) (7,994) (17,766)
Acquisitions, net of cash acquired (3,035) (6,437) (11,876)
Net cash used for -------- -------- --------
investing activities............. (29,714) (18,481) (39,592)
-------- -------- --------
Cash flows from financing activities:
Net proceeds from issuance of
common stock ......................... 4,900 1,646 3,560
Purchase of treasury stock.............. -- -- (3)
Principal payments under capital
lease obligations..................... (299) (393) (377)
Repayment of R-Byte Inc. debt........... -- -- (1,750)
Net cash provided by -------- -------- --------
financing activities............. 4,601 1,253 1,430
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents............................. 1,238 10,751 (14,316)
Cash and cash equivalents at beginning
of year................................. 44,995 34,244 48,560
-------- -------- --------
Cash and cash equivalents at end
of year................................. $46,233 $44,995 $34,244
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 40
EXABYTE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------
December 31, January 1, January 2,
1994 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income................................ $32,405 $16,182 $20,494
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation, amortization
and other.......................... 13,697 13,746 8,888
Writedown of fixed assets............ 81 487 --
Deferred income tax provision........ (6,212) (3,875) 16
Provision for losses and reserves
on accounts receivable............. 5,442 1,798 276
Purchased research and development... 2,597 -- 13,469
Change in assets and liabilities, net of acquisitions:
Accounts receivable....................... (17,187) (8,103) (731)
Inventories............................... (10,669) 13,433 (26,034)
Other current assets...................... (1,613) 75 (115)
Other assets.............................. (103) (106) 147
Accounts payable.......................... 790 (9,894) 2,991
Accrued liabilities....................... 6,614 1,945 (664)
Accrued income taxes...................... 509 2,291 5,109
-------- -------- --------
Net cash provided by
operating activities............... $26,351 $27,979 $23,846
======== ======== ========
Supplemental schedule of non-cash
investing and financing activities:
Transfer of inventories to
property and equipment.................. $2,613 $1,830 2,918
Disposal of fully depreciated
property and equipment.................. 1,835 852 328
Capital lease obligations................. -- 286 606
Fair market value of acquisition assets,
including purchased research
and development and goodwill............ 3,605 8,677 15,156
Acquisition liabilities assumed........... 538 2,177 3,156
Income tax benefit of disqualifying
dispositions of common stock............ 1,067 446 4,081
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 41
EXABYTE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Exabyte Corporation (the "Company") was incorporated on June 5, 1985 under the
laws of the state of Delaware. The Company engages in the design, development,
manufacture and marketing of computer magnetic tape subsystems for general
commercial application. The Company's customers include original equipment
manufacturers, value-added resellers and distributors. The Company reports
its results of operations on the basis of a fiscal year of 52 or 53 weeks
ending on the Saturday closest to December 31.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, Exabyte FSC Ltd., a foreign sales
corporation, Nihon Exabyte Corporation (Japan), Exabyte Europe B.V.
(The Netherlands), Exabyte Scotland Limited (Scotland), Exabyte Texas
Corporation (Texas) and Exabyte Magnetics GmbH (Germany). During 1994,
the Company liquidated two other wholly owned subsidiaries, R-Byte Inc.
(California) and Tallgrass Technologies Inc. (Kansas), whose products and
business activities were integrated into the Company. All intercompany
accounts and transactions have been eliminated.
Foreign Currency Translation
The U.S. dollar is the functional currency of the consolidated corporation.
For the Company's foreign subsidiaries, monetary assets and liabilities are
translated into U.S. dollars using the exchange rates in effect at the balance
sheet date and nonmonetary assets are translated at historical rates. Results
of operations are translated using the average exchange rates during the
period. Foreign exchange gains and losses included in the consolidated
statements of operations were not material in any year presented.
Foreign Currency Forward Contracts
The Company enters into foreign currency forward contracts in anticipation of
movements in the dollar/yen exchange rate which it uses to hedge the purchase
of certain inventory components from Japanese manufacturers. The Company had
outstanding contracts totaling $20.4 million, $25.2 million and $12.8 million
at December 31, 1994, January 1, 1994, and January 2, 1993, respectively. The
maturity dates for these contracts for all three years were within six months
of the Company's respective year-end. Gains or losses due to exchange rate
movements are deferred and recognized in income as inventory is sold. Hedged
inventory transactions are included in the Statement of Cash Flows as operating
activities. The aggregate fair value of foreign currency forward contracts at
December 31, 1994, based on quoted market prices of comparable contracts, was
not materially different from their contractual amounts.
Revenue Recognition
Sales are recognized upon shipment of products to customers. Revenue from
sales to certain distributors is subject to agreements allowing certain rights
of return and price protection on unsold merchandise held by those
distributors. Accordingly, reserves for estimated future returns and for
price protection are provided in the period of the sale.
<PAGE> 42
Concentration of Credit Risk
The Company's customers include original equipment manufacturers, value-added
resellers and distributors. Financial instruments which potentially subject
the Company to concentrations of credit risk are primarily accounts receivable,
cash equivalents and short-term investments. The Company performs ongoing
credit evaluations of its customers' financial condition and, generally,
requires no collateral from its customers. Accounts receivable are summarized
below:
December 31, January 1,
1994 1994
-------- --------
(In thousands)
Accounts receivable.......................... $69,394 $55,399
Less: reserves and allowance for
non-collection............................. (4,454) (2,258)
------- -------
$64,940 $53,141
======= =======
During the fiscal years ended December 31, 1994, January 1, 1994 and
January 2, 1993, one customer accounted for approximately 17%, 16% and 16%,
respectively, of sales. During the fiscal years ended January 1, 1994 and
January 2, 1993, another customer accounted for approximately 10% of sales in
each year. No other customers accounted for 10% or more of sales in any of
the three years presented.
Foreign Operations and Geographic Information
The following table summarizes the Company's operations in different
geographic areas:
<TABLE>
<CAPTION>
Year Ended December 31, 1994 United
(In thousands) States Europe Eliminations Consolidated
-------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers..... $354,904 $26,940 $ -- $381,844
Transfers between geographic areas.. 26,679 5,533 (32,212) --
-------- ------- -------- --------
Total net sales..................... $381,583 $32,473 $(32,212) $381,844
======== ======= ======== ========
Net Income.......................... $ 30,906 $ 1,499 $ -- $ 32,405
======== ======= ======== ========
Identifiable Assets................. $236,354 $32,665 $(26,254) $242,765
======== ======= ======== ========
</TABLE>
Sales and transfers between geographic areas are accounted for at arms length
prices, which generally provide a profit after coverage of all operating costs.
The identifiable assets by geographic areas are those assets used in the
Company's operations in each area. The Company's Far East operations have not
been disclosed as a separate geographic area because revenues from Far East
sales are recorded by entities in other geographic areas and Far East
identifiable assets are less than 10% of consolidated assets. Revenues
<PAGE> 43
generated by, and identifiable assets of, foreign operations were not
material in either 1993 or 1992.
Sales were made to unaffiliated customers in the following geographic areas:
1994 1993 1992
-------- -------- --------
(In thousands)
United States..... $280,294 $253,777 $236,593
Europe............ 73,818 40,930 39,278
Other............. 27,732 15,588 11,573
-------- -------- --------
$381,844 $310,295 $287,444
======== ======== ========
Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Such cash equivalents
aggregated $40,687,000 and $39,582,000 at December 31, 1994 and
January 1, 1994, respectively. Cash equivalents are carried at cost which
approximates fair value.
Short-Term Investments
Short-term investments are stated at cost, which approximates market value.
Inventories
Inventories are stated at the lower of cost or market, cost being determined by
the first-in, first-out method. Inventories consisted of the following:
December 31, January 1,
1994 1994
-------- --------
(In thousands)
Raw materials and component parts............ $34,125 $24,278
Work-in-process.............................. 1,914 2,690
Finished goods............................... 12,197 13,212
------- -------
$48,236 $40,180
======= =======
Depreciation and Amortization
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the respective
depreciable assets (two to five years). Leasehold improvements are amortized on
a straight-line basis over the shorter of the useful life of the asset or the
lease term. Maintenance and repairs are expensed as incurred and improvements
are capitalized. Goodwill resulting from acquisitions is amortized using the
straight-line method over five years. Amortization expense was $880,000 in
1994 and $807,000 in 1993.
<PAGE> 44
Warranty Costs
A provision for estimated future costs which may be incurred under the
Company's various product warranties is recorded when products are shipped.
Research and Development Costs
Research and development costs are expensed as incurred.
Income Taxes
Effective January 3, 1993, the Company adopted prospectively the guidelines of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which had no material effect on the consolidated financial statements.
Deferred income taxes are provided for temporary differences between the
financial reporting basis and tax basis of the Company's assets and
liabilities. Income taxes are also provided for taxes currently payable based
on taxable income. In 1992 under the Company's previous method of accounting
for income taxes, deferred tax expense resulted from differences in the
recognition of income and expense for financial reporting and tax purposes.
Net Income Per Share
Net income per share is based on the weighted average number of shares of
common stock and common stock equivalents (dilutive stock options) outstanding
during each respective period. Proceeds from the exercise of the dilutive
stock options are assumed to be used to repurchase outstanding shares of the
Company's common stock at the average fair market value during the period.
NOTE 2--PROPERTY AND EQUIPMENT AND CAPITAL LEASE OBLIGATIONS
Property and equipment consist of the following:
December 31, January 1,
1994 1994
-------- --------
(In thousands)
Equipment and furniture...................... $51,738 $38,741
Equipment and furniture under capital leases. 1,944 1,947
Leasehold improvements....................... 13,831 12,142
Less: accumulated depreciation and
amortization............................... (38,347) (27,853)
------- -------
$29,166 $24,977
======= =======
Depreciation expense was $12,956,000, $12,851,000 and $8,973,000 in 1994, 1993
and 1992, respectively. Amortization of equipment and furniture under capital
leases is included in depreciation expense.
The following presents future minimum lease payments under the capital leases
together with the present value of the minimum lease payments as of
December 31, 1994:
<PAGE> 45
(In thousands)
1995................................... $242
1996................................... 215
1997................................... 31
1998................................... 6
----
494
Less: amount representing interest.......... (40)
----
Present value of minimum lease payments..... 454
Less: current portion....................... (217)
----
$237
====
NOTE 3--ACCRUED LIABILITIES
Accrued liabilities consist of the following:
December 31, January 1,
1994 1994
-------- --------
(In thousands)
Wages and employee benefits.................. $ 7,917 $ 6,126
Warranty and related costs................... 11,839 6,993
Other........................................ 1,589 1,074
------- -------
$21,345 $14,193
======= =======
NOTE 4--LINE OF CREDIT
As of December 31, 1994, the Company maintained a $15,000,000 unsecured line of
credit. No borrowings were outstanding under the line as of that date. Under
the terms of the agreement, the Company may borrow the lesser of $15,000,000
or 80% of qualified accounts receivable plus 25% of qualified inventories
(limited to $3,000,000). Borrowings made under the agreement bear interest at
the bank's prime rate. The Company's bank line of credit prohibits the
payment of dividends without prior bank approval. The line of credit
agreement also includes certain financial and other covenants. The agreement
is currently scheduled to expire in April 1995.
Interest expense aggregated $156,000, $159,000 and $140,000 in 1994, 1993 and
1992, respectively.
NOTE 5--CAPITAL STOCK AND STOCK OPTIONS
Stock Options
The Company authorized, under its 1987 incentive stock plan as amended,
6,500,000 shares of common stock for issuance to employees, including officers
and directors. Under the plan, options are granted at an exercise price not
less than the fair market value of the stock on the date of grant. Outstanding
options vest over periods up to 50 months and expire 10 years after the date of
grant, except in the event of the termination or death of the employee
whereupon vested shares must be exercised within 90 days.
<PAGE> 46
The following is a summary of stock option transactions:
Shares Price per share
------ ---------------
(In thousands)
Outstanding at December 28, 1991..... 1,896 $0.10 - $25.63
Granted............................ 851 $16.13 - $35.63
Exercised.......................... (525) $0.10 - $25.63
Forfeited.......................... (119) $0.50 - $35.63
-----
Outstanding at January 2, 1993....... 2,103 $0.10 - $35.63
Granted............................ 721 $8.88 - $17.50
Exercised.......................... (163) $0.10 - $16.88
Forfeited.......................... (366) $0.75 - $35.63
-----
Outstanding at January 1, 1994....... 2,295 $0.10 - $35.63
Granted............................ 888 $15.38 - $21.75
Exercised.......................... (392) $0.10 - $20.63
Forfeited.......................... (177) $8.88 - $35.63
-----
Outstanding at December 31, 1994..... 2,614 $0.10 - $35.63
=====
Vested stock options outstanding at
December 31, 1994.................. 1,157 $0.10 - $35.63
=====
At December 31, 1994, there were 754,000 shares available for future grants of
options.
Employee Stock Purchase Plan
On May 1, 1990, the stockholders approved an Employee Stock Purchase Plan which
is qualified under Section 423 of the Internal Revenue Code. Under the Plan,
employees may elect to have up to 10% of their gross salaries withheld by
payroll deductions and applied to the purchase of common stock at a price
equal to 85% of the lower of the market value at the beginning or the end of
each six-month participation period during which the payroll deductions are
accumulated to purchase the shares. The Company has authorized 500,000 shares
of common stock for issuance under this plan of which 74,838, 87,756 and 70,258
were issued to participants during 1994, 1993 and 1992, respectively.
Stockholder Rights Plan
On January 24, 1991, the Board of Directors adopted a Stockholder Rights Plan
("Rights Plan") in which preferred stock purchase rights were distributed as a
dividend at the rate of one right for each share of Exabyte common stock held
as of February 15, 1991. The Rights Plan is designed to deter coercive or
unfair takeover tactics and to prevent an acquiring entity from gaining control
of the Company without offering a fair price to all of the Company's
stockholders.
Each right will entitle the holders of the Company's common stock to purchase
one one-hundredth of a share of preferred stock at an exercise price of $75,
subject to adjustment in certain cases to prevent dilution. The rights are
evidenced by the common stock certificates and are not exercisable or
transferable apart from the common stock until the earlier of ten days after
the date on which a person or group has acquired beneficial ownership of 20% or
more of the common stock (an "Acquiring Entity") or ten business days after the
public announcement of the commencement of a tender or exchange offer that
<PAGE> 47
would result in the Acquiring Entity owning 20% or more of the common stock.
Further, the rights generally entitle each right holder (except the
Acquiring Entity) to purchase that number of shares of the Company's common
stock which equals the exercise price of the right divided by one-half of the
current market price of the common stock if any person becomes the beneficial
owner of 20% or more of the common stock. If an Acquiring Entity purchases
at least 20% of the Company's common stock, but has not acquired 50%, the Board
of Directors may exchange the rights (except those of the Acquiring Entity) for
one share of common stock per right. In addition, under certain circumstances,
if the Company is involved in a merger or other business combination in which
the Company is not the surviving corporation, the rights entitle the holder to
buy common stock of the Acquiring Entity with a market value of twice the
exercise price of each right.
The Company is generally entitled to redeem the rights for $.01 per right at
any time until ten days following a public announcement that a 20% stock
position has been acquired and in certain other circumstances. The rights,
which do not have voting rights, will expire on February 15, 2001, unless
redeemed or exchanged earlier by the Company pursuant to the Rights Plan.
NOTE 6--INCOME TAXES
Pretax income was taxed in the following jurisdictions:
1994 1993 1992
------- ------- -------
(In thousands)
Domestic...... $43,865 $22,918 $37,796
Foreign....... 3,940 1,014 1,067
------- ------- -------
$47,805 $23,932 $38,863
======= ======= =======
The provisions for income tax consist of the following:
1994 1993 1992
------- ------- -------
(In thousands)
Current:
Federal..... $17,214 $ 9,366 $15,220
State....... 2,737 1,938 2,751
Foreign..... 1,661 321 382
Deferred:
Federal..... (5,891) (3,528) (135)
State....... (321) (347) 151
------- ------- -------
$15,400 $ 7,750 $18,369
======= ======= =======
Total income tax expense differs from the amount computed by applying the U.S.
federal income tax rate of 35% in 1994 and 1993 and 34% in 1992 to income
before income taxes for the following reasons:
<PAGE> 48
1994 1993 1992
------- ------- -------
(In thousands)
U.S. federal income tax
at statutory rate.......... $16,732 $ 8,376 $13,214
State income taxes, net
of federal benefit......... 1,776 788 1,915
Purchased research and
development................ 909 -- 4,154
Research and development
credits.................... (875) (856) (243)
Tax exempt interest.......... (419) (326) (619)
Foreign Sales Corporation.... (534) (413) (531)
Enacted future rate changes.. -- (113) --
Net operating loss
carryforward recognized.... (2,650) -- --
Other........................ 461 294 479
------- ------- -------
$15,400 $ 7,750 $18,369
======= ======= =======
Deferred tax assets are comprised of the following:
December 31, January 1,
1994 1994
-------- --------
(In thousands)
Warranty reserves $ 3,725 $ 2,709
Depreciation 3,406 2,066
Acquired net operating loss carryforward 2,587 2,650
Bad debt and allowances 1,462 839
Amortization of goodwill 465 243
Vacation costs 623 602
Inventory reserves 511 752
Other 1,008 364
------- -------
Gross deferred tax asset 13,787 $10,225
Deferred tax valuation allowance -- (2,650)
------- -------
$13,787 $ 7,575
======= =======
The deferred tax valuation allowance at January 1, 1994, relates to the
acquired net operating losses of R-Byte (see Note 10). During the fourth
quarter of 1994, the Company liquidated R-Byte and determined that a valuation
allowance was no longer considered necessary. A net reduction of income tax
expense totaling $2,650,000 was reflected as a result. At December 31, 1994,
net operating loss carryforwards of $7,365,000 are available to offset future
taxable income. Utilization of the carryforwards are subject to an annual
limitation of $670,000 through 2005.
NOTE 7--RELATED PARTY TRANSACTIONS
The Company maintains a product license agreement with Kubota Corporation of
Japan ("Kubota"), a former stockholder of the Company, which grants Kubota the
exclusive right to manufacture and market certain Company products in Japan and
other specific territories in exchange for quarterly royalties. Royalty income
<PAGE> 49
aggregated $241,000, $463,000 and $301,000 in 1994, 1993 and 1992,
respectively. Through June 30, 1993, Kubota and the Company maintained an OEM
purchase agreement, under which the Company was required to purchase a minimum
of 58% of its annual product requirements of specified products. Product
pricing was subject to periodic negotiation. The OEM purchase agreement was
terminated by mutual consent of Kubota and the Company in 1993. Purchases from
Kubota aggregated approximately $32,763,000, and $75,940,000 in 1993 and 1992,
respectively.
NOTE 8--LEASE COMMITMENTS
The Company leases its office, production and sales facilities under various
operating lease arrangements. Most of the leases contain various provisions
for rental adjustments including, in certain cases, a provision based on
increases in the Consumer Price Index. In addition, most of the leases require
the Company to pay property taxes, insurance and normal maintenance costs.
Future minimum lease payments under these arrangements are as follows:
(In thousands)
1995................................... $ 4,939
1996................................... 4,185
1997................................... 4,141
1998................................... 3,434
1999................................... 3,403
After 2000............................. 10,258
-------
$30,360
=======
Rent expense aggregated $4,942,000, $5,368,000 and $3,427,000 in 1994, 1993 and
1992, respectively.
NOTE 9--EMPLOYEE BENEFIT PLAN
Effective January 1988, the Company established a qualified Section 401(K)
Savings Plan. The Plan allows eligible employees to contribute up to 15% of
their salaries on a pre-tax basis. Company contributions to the Plan are
discretionary. The Company recorded as expense matching contributions totaling
$652,000, $461,000 and $489,000 in 1994, 1993 and 1992, respectively. Company
contributions are fully vested after six years of employment.
NOTE 10--ACQUISITIONS
On October 4, 1994, the Company acquired from Grundig AG all the outstanding
common shares of Grundig Data Scanner GmbH, subsequently renamed Exabyte
Magnetics GmbH ("EMG") for a purchase price of $3.1 million. EMG is engaged
in the design and manufacture of heads and scanners for incorporation in
high-performance helical-scan tape drives and is located in Feurth, Germany.
On February 19, 1993, the Company acquired the assets of the Mass Storage
Division ("MSD") of Everex Systems, Inc. for a purchase price of $5 million in
cash. Based in Ann Arbor, Michigan, this entity designs quarter-inch cartridge
DC2000 tape drives for the computer storage marketplace.
<PAGE> 50
On February 16, 1993, the Company acquired all of the assets and certain
liabilities of Tallgrass Technologies Corp. ("Tallgrass"), a value-added
reseller of computer magnetic tape subsystems, for a purchase price of $1.5
million in cash. Based in Lenexa, Kansas, this entity functions as the
Company's North and South American distribution sales arm.
On October 1, 1992, the Company acquired all of the issued and outstanding
preferred and common stock of R-Byte Inc. ("R-Byte") for $12,000,000 in cash.
In addition, at the closing of the transaction, the Company repaid $1,750,000
of outstanding principal plus accrued interest on certain debt obligations of
R-Byte. Based in San Jose, California, R-Byte develops 4mm digital audio tape
drives for the computer storage marketplace.
The results of operations of each of these entities have been included in the
accompanying Consolidated Financial Statements since their dates of
acquisition. In addition, each of the acquisitions was accounted for using the
purchase method; accordingly, assets and liabilities were recorded at their
estimated fair values at the dates of acquisition. The excess of the purchase
price over the net assets acquired of EMG ($2,597,000) and R-Byte ($13,469,000)
was charged to operations as "Purchased Research and Development" in accordance
with Statement of Financial Accounting Standards No. 2, "Accounting for
Research and Development Costs." The excess of the purchase price over the net
assets acquired of Tallgrass ($1,353,000) and MSD ($3,046,000) were assigned to
goodwill and are being amortized on a straight line basis over five years. The
pro forma impact of the acquisitions on the Company's results of operations was
not significant.
Item 9.
DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None
<PAGE> 51
PART III
Item 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Company's directors is incorporated by reference
from the information contained in the Section entitled "Election of Directors"
and "Compliance with Section 16(a) of the Securities Exchange Act of 1934" in
the Company's definitive Proxy Statement for the Company's 1994 Annual
Meeting of Stockholders to be filed within 120 days after December 31, 1994,
the close of its fiscal year ("Proxy Statement"). Information concerning the
executive officers of the Company is set forth in Part I of this Form 10-K.
Item 11.
EXECUTIVE COMPENSATION
Information required by this Item is incorporated by reference from the Section
entitled "Executive Compensation," contained in the Proxy Statement.
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item is incorporated by reference from the Section
entitled "Security Ownership of Certain Beneficial Owners and Management"
contained in the Proxy Statement.
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item is incorporated by reference from the Section
entitled "Certain Transactions" contained in the Proxy Statement.
<PAGE> 52
PART IV
Item 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements of Exabyte Corporation and
Subsidiaries are included in Part II, Item 8.
Consolidated Financial Statements as of December 31, 1994 and January 1, 1994
and for each of the three fiscal years in the period ended December 31, 1994.
Page
-----
Report of Independent Accountants............................... 35
Consolidated Balance Sheets..................................... 36
Consolidated Statements of Operations........................... 37
Consolidated Statements of Changes in Stockholders' Equity...... 38
Consolidated Statements of Cash Flows........................... 39-40
Notes to Consolidated Financial Statements...................... 41-50
(a) 2. Financial Statement Schedules
Schedules - Years ended December 31, 1994, January 1, 1994 and January 2, 1993
I - Marketable Securities - Other Investments.......... 56
VIII - Valuation and Qualifying Accounts and Reserves..... 57
All other schedules are omitted because they are inapplicable, not required
under the instructions, or the information is included in the financial
statements or notes thereto.
<PAGE> 53
(a) 3. Exhibit Index
Exhibit
Number Description
- ------- -----------
3.1 Restated Certificate of Incorporation. (1)
3.2 Certificate of Determination of Preference of Series A Junior
Participating Preferred Stock. (2)
3.3 Bylaws of the Company. (1)
**10.1 Incentive Stock Plan, as amended and restated on January 27,
1993.(11)
**10.2 Stock Option Agreements used in connection with the Incentive Stock
Plan. (3)
**10.3 1990 Employee Stock Purchase Plan. (3)
**10.4 Employee Stock Purchase Plan Offering used in connection with the
1990 Employee Stock Purchase Plan. (3)
**10.5 Form of participation agreement used in connection with the 1990
Employee Stock Purchase Plan. (3)
**10.6 Stock Option Agreement, dated January 31, 1989, between the Company
and Bruce M. Holland, a director of the Company. (1)
10.7 Form of Indemnity Agreement entered into by the Company with each
director and executive officer of the Company.
*10.8 Product License Agreement, dated July 30, 1987, between the Company
and Nippon Systemhouse Co., Ltd. and Kubota, Ltd., as amended. (1)
*10.9 Second Amendment, Product License Agreement, dated December 20, 1991,
among the Company and Nippon Systemhouse Co., Ltd. and Kubota
Corporation. (7)
*10.10 8mm Mechanical Components Supply Agreement, dated as of April 1,
1990, among Sony Corporation, the Company and Nihon Exabyte
Corporation. (5)
10.11 First Amendment, 8mm Mechanical Components Supply Agreement, dated
July 9, 1992, among Sony Corporation, the Company and Nihon Exabyte
Corporation.(11)
10.12 Agreement, dated November 8, 1990, between Sony Corporation and the
Company.(6)
10.13 Loan Agreement, dated April 30, 1993, between the Company and First
National Bank in Boulder. (12)
10.14 Lease Agreement, dated December 1, 1989, between the Company and
Eastpark Associates. (4)
10.15 First and Second Addenda, dated May and July 16, 1990 respectively,
to the Lease Agreement, dated December 1, 1989, between the Company
and EastPark Associates. (5)
10.16 Lease Agreement, dated July 2, 1990, between the Company and SBR
Investments. (5)
10.17 Lease Agreement, dated July 2, 1990, between the Company and The
First National Bank in Boulder, Trustee for the Barrell Family
Trust and Frank R. Drexel. (5)
10.18 Lease Agreement, dated December 9, 1991 between the Company and
Eastpark Technology Center, Ltd. (7)
10.19 Option Contract, dated December 9, 1991 between the Company and
Eastpark Technology Center, Ltd. (7)
10.20 Lease Agreement, dated May 8, 1992, between the Company and Eastpark
Associates, Ltd. (8)
**10.21 1995 Officer Bonus Plan.
10.22 Rights Agreement, dated January 24, 1991, between the Company and The
First National Bank of Boston, as Rights Agent. (2)
10.23 Vail/Steamboat 8mm Mechanical Components Supply Agreement, dated as
of January 1, 1992, among Sony Corporation, Nihon Exabyte Corporation
and the Company. (9)
<PAGE> 54
10.24 First Amendment of Vail/Steamboat 8mm Mechanical Components Supply
Agreement, dated as of April 1, 1994.
10.25 Agreement and Plan of Reorganization By and Among Exabyte
Corporation, EXB Merger Corporation, and R-Byte, Inc. (10)
10.26 Asset Purchase Agreement Dated as of February 19, 1993 By and Among
Exabyte Corporation, Exabyte Acquisition Subsidiary Corporation and
Everex Systems, Inc. (11)
10.27 Asset Purchase Agreement Dated February 12, 1993 By and Among Exabyte
Corporation, Tallgrass Corporation, a Delaware Corporation, and
Tallgrass Technologies Corporation, a Kansas Corporation.(11)
10.28 Agreement for the sale and transfer of all shares in Grundig Data
Scanner GmbH dated September 13, 1994. (13)
22.1 List of Subsidiaries.
24.0 Consent of Price Waterhouse LLP.
* Confidential treatment requested for parts of this agreement.
** Indicates management contracts or compensation plans or arrangements
filed pursuant to Item 601(b)(10) of Regulation S-K.
- ----------------
(1) Filed as an Exhibit to the Company's Registration Statement on Form
S-1 (Registration No. 33-30941) filed with the Securities and Exchange
Commission (the "SEC") on September 8, 1989 or Amendments Nos. 1 and 2
thereto (filed on October 12, 1989 and October 16, 1989 respectively),
and incorporated herein by reference.
(2) Filed as an Exhibit to the Company's Report on Form 8-K, as filed with
the SEC on January 26, 1991 and incorporated herein by reference.
(3) Filed as an Exhibit to the Company's Registration Statement on Form S-8
(Registration No. 33-33414), as filed with the SEC on February 9, 1990
and incorporated herein by reference.
(4) Filed as an Exhibit to the Company's 1989 Annual Report on Form 10-K,
as filed with the SEC on March 27, 1990 and incorporated herein by
reference.
(5) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q, as
filed with the SEC on November 9, 1990 and incorporated herein by
reference.
(6) Filed as an Exhibit to the Company's 1990 Annual Report on Form 10-K,
as filed with the SEC on February 27, 1991 and incorporated herein by
reference.
(7) Filed as an Exhibit to the Company's 1991 Annual Report on Form 10-K,
as filed with the SEC on March 6, 1992 and incorporated herein by
reference.
(8) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q, as
filed with the SEC on May 9, 1992 and incorporated herein by reference.
(9) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q, as
filed with the SEC on August 11, 1992 and incorporated herein by
reference.
(10) Filed as an Exhibit to the Company's Report on Form 8-K, as filed with
the SEC on October 15, 1992 and incorporated herein by reference.
<PAGE> 55
(11) Filed as an Exhibit to the Company's Annual Report on Form 10-K, as
filed with the SEC on March 24, 1993 and incorporated herein by
reference.
(12) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q, as
filed with the SEC on May 14, 1993 and incorporated herein by
reference.
(13) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q as
filed with the SEC on November 17, 1994 and incorporated herein by
reference.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the fiscal quarter ended January
1, 1994.
<PAGE> 56
EXABYTE CORPORATION AND SUBSIDIARIES
Schedule I - Marketable Securities - Other Investments
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- ----------------- ----------------- -------- ------------ ---------------------------
Number of Market Amount included in the
Shares or Units/ Cost Value of Balance Sheet as:
Name of Principal Amount of each issue --------------------------
Issuer and Title of Bonds each at Balance Cash Short-term
of each issue and Notes issue Sheet date Equivalents(b) Investment
- ----------------- ----------------- -------- ------------ ---------------------------
<S> <C> <C> <C> <C> <C>
JANUARY 1, 1994:
State and Municipal Securities (a): $29,450 $29,450 $29,450 $27,450 $2,000
Money Market Preferred Stock:
Michelin 4,000 4,000 4,000 -- 4,000
Smithkline "F" 4,000 4,000 4,000 -- 4,000
Other (a) 11,000 11,000 11,000 -- 11,000
Money Market Funds 12,132 12,132 12,132 12,132 --
------- ------- ------- ------- -------
January 1, 1994 Balance $60,582 $60,582 $60,582 $39,582 $21,000
======= ======= ======= ======= =======
DECEMBER 31, 1994:
State and Municipal Securities:
VanKampen Pennsylvania $5,000 $5,000 $5,000 $5,000 $ --
Other (a) 21,111 21,111 21,111 16,000 5,111
Money Market Preferred Stock:
British Aerospace 5,000 5,000 5,000 -- 5,000
Fujitec A 5,000 5,000 5,000 -- 5,000
Shell Oil 5,000 5,000 5,000 -- 5,000
Smithkline D 5,000 5,000 5,000 -- 5,000
Other (a) 22,800 22,800 22,800 13,800 9,000
Money Market Funds:
Bank One Securities 5,115 5,115 5,115 5,115 --
Other (a) 772 772 772 772 --
------- ------- ------- ------- -------
December 31, 1994 Balance $74,798 $74,798 $74,798 $40,687 $34,111
======= ======= ======= ======= =======
</TABLE>
(a) No individual security issue exceeds 2% of total assets
(b) Also included in the balance sheet caption "Cash and Cash Equivalents" are
cash and time deposits of $5,546 as of December 31, 1994 and $5,413 as of
January 1, 1994.
<PAGE> 57
EXABYTE CORPORATION AND SUBSIDIARIES
Schedule VIII - Valuation and Qualifying Accounts and Reserves
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
- ----------------- ------------ -------- ------------ --------- ----------
Balance Charged
at to Charged Balance
Beginning Costs to at End
of and Other of
Description Period Expenses Accounts Deduction Period
- ----------------- ------------ -------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended January 2, 1993:
Allowance for Doubtful Accounts $ 676 $ 276 $ -- $ (227) (1) $ 725
====== ====== ====== ====== ======
Year Ended January 1, 1994:
Allowance for Doubtful Accounts $ 725 $ 353 $ -- $ (243) (1) $ 835
Reserves for Sales Programs -- -- 1,445 (22) (2) 1,423
Deferred Tax Valuation Allowance 2,650 -- -- -- 2,650
------ ------ ------ ------ ------
$3,375 $353 $1,445 $ (265) $4,908
====== ====== ====== ====== ======
Year Ended December 31, 1994:
Allowance for Doubtful Accounts $ 835 $ 36 $ -- $ 152 (1) $1,023
Reserves for Sales Programs 1,423 -- 5,406 (3,398) (2) 3,431
Deferred Tax Valuation Allowance 2,650 -- -- (2,650) (3) --
------ ------ ------ ------ ------
$4,908 $ 36 $5,406 $(5,896) $4,454
====== ====== ====== ====== ======
</TABLE>
(1) Accounts written off, net of recoveries.
(2) Net credits issued to customers for sales programs.
(3) Reduction in income tax expense related to the liquidation of R-Byte.
<PAGE> 58
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Boulder, State of Colorado, on March 17, 1995.
EXABYTE CORPORATION
By /s/ William L. Marriner
-----------------------
William L. Marriner
Title: Executive Vice President, Chief
Financial Officer and Treasurer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Peter D. Behrendt and William L. Marriner, and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments to this
report, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons in the capacities
and on the dates indicated.
/s/ Peter D. Behrendt Chairman of the March 17, 1995
- --------------------- Board of Directors,
Peter D. Behrendt Chief Executive Officer
and President
(Principal Executive Officer)
/s/ William L. Marriner Executive Vice President, March 17, 1995
- ----------------------- Chief Financial Officer
William L. Marriner and Treasurer(Principal
Financial and Accounting
Officer)
/s/ David L. Riegel Executive Vice President March 17, 1995
- ------------------- and Chief Operating Officer
David L. Riegel
<PAGE> 59
/s/ Bruce M. Holland Director March 17, 1995
- --------------------
Bruce M. Holland
/s/ James M. McCoy Director March 17, 1995
- ------------------
James M. McCoy
/s/ Mark W. Perry Director March 17, 1995
- -----------------
Mark W. Perry
/s/ Ralph Z. Sorenson Director March 17, 1995
- ---------------------
Ralph Z. Sorenson
/s/ Thomas G. Washing Director March 17, 1995
- ---------------------
Thomas G. Washing
<PAGE> 1
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made and entered into this
11th day of May, 1994 by and between Exabyte Corporation, a Delaware
corporation (the "Corporation"), and __________ ("Agent").
R E C I T A L S
WHEREAS, Agent performs a valuable service to the Corporation in his or her
capacity as a ___________ of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted by-laws (the
"By-Laws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving
at the request of the Corporation in such capacities with other corporations
or enterprises, as authorized by the Delaware General Corporation Law, as
amended (the "Code");
WHEREAS, the By-Laws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its directors, officers, employees and
other agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as a ________ of the
Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as a ________
after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. Services to the Corporation. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as a
________ of the Corporation or as a director, officer or other fiduciary of
an affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the By-Laws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such
position or any other position (subject to any contractual obligation that
Agent may have assumed apart from this Agreement) and that the Corporation or
any affiliate shall have no obligation under this Agreement to continue such
Agent in such position or any other position.
2. Indemnity of Agent. The Corporation hereby agrees to hold harmless and
indemnify Agent to the fullest extent authorized or permitted by the provisions
of the By-Laws and the Code, as the same may be amended from time to time (but
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than the By-Laws or the Code permitted prior to
adoption of such amendment).
3. Additional Indemnity. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further
agrees to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Agent becomes legally obligated to pay because of any claim or
<PAGE> 2
claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of the Corporation
or is or was serving or at any time serves at the written request of the
Corporation as a director, officer, employee or other agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise; and
(b) otherwise to the fullest extent as may be provided to Agent by the
Corporation under the non-exclusivity provisions of the Code and Section 5.6
of the By-Laws.
4. Limitations on Additional Indemnity. No indemnity pursuant to Section 3
hereof shall be paid by the Corporation:
(a) on account of any claim against Agent for an accounting of profits
made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act
of 1934 and amendments thereto or similar provisions of any federal, state or
local statutory law;
(b) on account of Agent's conduct that was knowingly fraudulent or
deliberately dishonest or that constituted willful misconduct;
(c) on account of Agent's conduct that constituted a breach of Agent's
duty of loyalty to the Corporation or that resulted in any personal profit or
advantage to which Agent was not legally entitled;
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity
clause, by-law or agreement, except in respect to any excess beyond payment
under such insurance, clause, by-law or agreement;
(e) if indemnification is not lawful (and, in this respect, both the
Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof) initiated by
Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the Corporation, (iii) such indemnification is
provided by the Corporation, in its sole discretion, pursuant to the powers
vested in the Corporation under the Code, or (iv) the proceeding is initiated
pursuant to Section 9 hereof.
5. Continuation of Indemnity. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the written request of the Corporation as a director, officer,
employee or other agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise) and shall continue
thereafter so long as Agent shall be subject to any possible claim or
<PAGE> 3
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrational, administrative or investigative, by reason of the
fact that Agent was serving in the capacity referred to herein.
6. Partial Indemnification. Agent shall be entitled under this Agreement to
indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay
in connection with any action, suit or proceeding referred to in Section 3
hereof even if not entitled hereunder to indemnification for the total amount
thereof, and the Corporation shall indemnify Agent for the portion thereof to
which Agent is entitled.
7. Notification and Defense of Claim. No later than thirty (30) days after
receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against
the Corporation under this Agreement, notify the Corporation of the
commencement thereof; but the omission so to notify the Corporation will not
relieve it from any liability which it may have to Agent otherwise than under
this Agreement. With respect to any such action, suit or proceeding as to
which Agent notifies the Corporation of the commencement thereof:
(a) The Corporation will be entitled to participate therein at its own
expense;
(b) Except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent
of its election to assume the defense thereof, the Corporation will not be
liable to Agent under this Agreement for any legal or other expenses
subsequently incurred by Agent in connection with the defense thereof except
for reasonable costs of investigation or otherwise as provided below. Agent
shall have the right to employ separate counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice
from the Corporation of its assumption of the defense thereof shall be at the
expense of Agent unless (i) the employment of counsel by Agent has been
authorized by the Corporation, (ii) Agent shall have reasonably concluded that
there may be a conflict of interest between the Corporation and Agent in the
conduct of the defense of such action or (iii) the Corporation shall not in
fact have employed counsel to assume the defense of such action, in each of
which cases the fees and expenses of Agent's separate counsel shall be at the
expense of the Corporation. The Corporation shall not be entitled to assume
the defense of any action, suit or proceeding brought by or on behalf of the
Corporation or as to which Agent shall have made the conclusion provided for
in clause (ii) above;
(c) The Corporation shall not be liable to indemnify Agent under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
(d) If there is a Change in Control (defined below) of the Corporation
(other than a Change in Control that has been approved by a majority of the
Corporation's Board of Directors who were directors immediately prior to such
Change in Control), then with respect to all matters thereafter arising
<PAGE> 4
concerning the rights of Agent to indemnity, expense payments and/or advances
under this Agreement or any other agreement or Corporation By-Law now or
hereafter in effect, the Corporation shall seek legal advice only from
Independent Legal Counsel (defined below) selected by Agent and approved by
the Corporation (which approval shall not be unreasonably withheld). Such
counsel, among other things, shall render its written opinion to the
Corporation and Agent as to whether and to what extent Agent would be
permitted to be indemnified under applicable law. The Corporation shall pay
the reasonable fees of such Independent Legal Counsel and fully indemnify such
counsel against any and all expenses (including attorneys' fees), claims,
liabilities and damages arising out of or relating to this Agreement or its
engagement pursuant hereto;
(e) For purposes of this Section, a "Change in Control" shall be deemed
to have occurred if (i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Corporation or a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions as their
ownership of the stock of the Corporation, becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities of
the Corporation representing 20% or more of the total voting power represented
by the Corporation's then outstanding voting securities, (ii) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Corporation and any new director whose
election by the Board of Directors or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of the
directors still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof, (iii) the stockholders
of the Corporation approve a merger or consolidation of the Corporation with
any other corporation, other than a merger or consolidation that would result
in the voting securities of the Corporation outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80% of the
total voting power represented by the voting securities of the Corporation or
such surviving entity outstanding immediately after such merger or
consolidation, or (iv) the stockholders or the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of (in one transaction or a series of
transactions) all or substantially all of the Corporation's assets; and
(f) For purposes of this section, "Independent Legal Counsel" shall be
defined as an attorney or firm of attorneys, selected in accordance with this
Section, who have not otherwise performed services for the Corporation or
Agent within the last five years (other than with respect to matters
concerning the rights of Agent under this Agreement, or of other agents under
similar indemnity agreements).
8. Expenses. The Corporation shall advance, prior to the final disposition
of any proceeding, promptly following request therefor but in any event no
later than five (5) days after written demand by Agent therefrom to the
Corporation, all expenses incurred by Agent in connection with such proceeding
upon receipt of an undertaking by or on behalf of Agent to repay said amounts
if it shall be determined ultimately that Agent is not entitled to be
indemnified under the provisions of this Agreement, the By-Laws, the Code or
otherwise. Agent's obligation to repay the Corporation said amounts shall be
unsecured and no interest shall be charged thereon.
<PAGE> 5
9. Enforcement. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court
of competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made
within ninety (90) days of request therefor. Agent, in such enforcement
action, if successful in whole or in part, shall be entitled to be paid also
the expense of prosecuting his claim. It shall be a defense to any action for
which a claim for indemnification is made under Section 3 hereof (other than
an action brought to enforce a claim for expenses pursuant to Section 8,
hereof, provided that the required undertaking has been tendered to the
Corporation) that Agent is not entitled to indemnification because of the
limitations set forth in Section 4 hereof. Neither the failure of the
Corporation (including its Board of Directors or its stockholders) to have
made a determination prior to the commencement of such enforcement action
that indemnification of Agent is proper in the circumstances, nor an actual
determination by the Corporation (including its Board of Directors or its
stockholders) that such indemnification is improper shall be a defense to the
action or create a presumption that Agent is not entitled to indemnification
under this Agreement or otherwise.
10. Letter of Credit.
(a) For purposes of this Section, "Litigation Costs" shall be defined as
all direct and indirect costs of any type or nature whatsoever (including,
without limitation, all attorneys' fees and related disbursements, other
out-of-pocket costs and reasonable compensation for time spent by Agent for
which he is not otherwise compensated by the Corporation or any third party)
actually and reasonably incurred by Agent in connection with either the
investigation, defense or appeal of a proceeding or the establishment or
enforcement of a right to indemnification under this Agreement, Section 145
of the Code or otherwise; provided, however, that Litigation Costs shall not
include any judgments, fines, ERISA excise taxes or penalties, or amounts
paid in settlement of a proceeding.
(b) In order to secure the obligations of the Corporation to indemnify
Agent with respect to Litigation Costs, the Corporation shall, at the option
of the Board of Directors, obtain an irrevocable standby letter of credit
naming Agent as sole beneficiary, issued by a financial institution having
assets in excess of $100 million (the "Bank") and containing terms and
conditions reasonably acceptable to Agent (the "Letter of Credit"). The
Letter of Credit shall provide that Agent may from time to time draw certain
amounts thereunder, upon presentation to the issuer thereof of a certificate
executed by Agent certifying (i) that Agent has made demand upon the
Corporation and its directors' and officers' liability insurance ("D&O")
insurance carrier, if any, for an amount not less than the amount Agent is
drawing upon under the Letter of Credit and that the Corporation has refused
to provide Agent with such amount and (ii) that Agent believes that Agent is
entitled under the terms of this Agreement to the amount which Agent is
drawing upon under the Letter of Credit.
(c) The Corporation shall maintain and renew the Letter of Credit or a
substitute letter of credit meeting the criteria of Section 10(b) hereof
during the term of this Agreement in a manner such that the Letter of Credit
shall be in the amount of $300,000 for each Agent and shall have an initial
term of one (1) year, be renewed for successive one-year periods, for as long
as Agent serves as an officer, director or other Agent of the Corporation and
for the period of four (4) years following the termination of Agent's service,
and shall provide that Agent, as beneficiary, shall be given at least sixty
(60) days' written notice by the issuer of the Letter of Credit in the event
<PAGE> 6
that such Letter of Credit has not been renewed by the Corporation at least
sixty (60) days prior to the end of any one-year term, on which notice, Agent
shall be entitled to draw against the Letter of Credit up to the face amount
thereof, and to place such amount in a segregated account in the name of Agent
which Agent agrees will be used only for the indemnification of Agent as
provided in this Agreement.
(d) Funds received from the Bank upon a draw under the Letter of Credit
(the "Funds") shall be deemed a loan by the Corporation to Agent of the Funds.
Agent will deposit the Funds in an interest-bearing account (the "Indemnity
Account") in the name and under the sole control of Agent with such financial
institution as the Corporation and Agent may agree; provided, however, that to
the extent that it is determined, contrary to the intent of the parties, that
Agent's receipt of the Funds constitutes a secured transaction between the
Corporation and Agent, the Corporation hereby grants Agent a security interest
in the Funds, which shall secure any and all of the Corporation's obligations
under this Agreement.
(e) Agent will not deposit any funds other than the Funds into the
Indemnity Account, nor otherwise commingle the Funds with any other funds.
Agent will use the Funds only for payment of Litigation Costs authorized under
this Agreement and for payment of any taxes, interest and penalties ("Taxes")
payable by or imposed upon Agent as a consequence of Agent's holding or
withdrawal of Funds, or with respect to the Funds and earnings thereon
(collectively, "Authorized Expenses"), will give the Corporation at least five
(5) days' written notice before withdrawing any of the Funds from the
Indemnity Account, and promptly thereafter provide the Corporation with such
evidence as the Corporation may reasonably request that any withdrawals from
the Indemnity Account and payment of the Funds have been made on account of
such Authorized Expenses.
(f) Interest on the Funds shall accrue to the benefit of Agent, but
shall (net of Authorized Expenses which Agent is not required to repay to the
Corporation pursuant to Section 8 hereof) be added to the loan amount,
considered part of the Funds and remain on the Indemnity Account. Unless
earlier repayment is required under this Agreement, on the fourth anniversary
of the termination of Agent's service as a director, officer, employee or
other agent of the Corporation, Agent will pay to the Corporation an amount
equal to the principal amount of the Funds and any accrued interest, less any
amounts paid for Authorized Expenses which Agent is not required to repay to
the Corporation pursuant to Section 8 hereof; provided, however, that if as of
such date an action is pending or threatened which would require
indemnification under the Agreement, and as of such date the Corporation's D&O
insurance carrier, if any, is refusing to provide interim reimbursements of
Authorized Expenses incurred or that may be incurred by Agent in the defense
of such action, the repayment obligation shall be suspended until the earlier
of the settlement of or entry of final judgment in such action, or the
commencement of payment of reimbursement of Authorized Expenses by the D&O
insurance carrier. To the extent Agent is entitled to reimbursement under
any D&O insurance policy for any Authorized Expenses paid by Agent from the
Funds, Agent assigns to the Corporation his right to such reimbursement.
(g) To secure repayment of the Funds, Agent grants to the Corporation
a security interest in the Funds and the Indemnity Account. Agent will
execute and deliver such documents, including notices to the institution with
which the Indemnity Account is maintained, as the Corporation reasonably
requests to perfect and continue the security interest granted under this
Agreement.
<PAGE> 7
(h) Any use of the Funds for any purpose other than payment of
Authorized Expenses will constitute a default under this Agreement. Upon such
default, the entire principal amount of the Funds, less any amount paid for
Authorized Expenses which Agent is not required to repay to the Corporation
pursuant to Section 8 hereof, will immediately become due and payable to the
Corporation.
(i) The Corporation agrees to treat the transfer of Funds pursuant to
this Agreement as a loan to Agent for federal and state income tax purposes
and, with respect to the Funds and any earnings thereon, to adopt in its tax
returns such reasonable and appropriate positions as will alleviate or
minimize to the maximum extent possible, any liability of Agent for Taxes,
but which are not reasonably likely to result in an increase in taxes to the
Corporation. The Corporation further agrees to indemnify each Agent, and to
hold each Agent harmless from and against any liability for Taxes (including
for Taxes payable with respect to this indemnification, and whether arising
upon the filing of a return or a subsequent adjustment by any taxing
authority) arising with respect to the Funds or earnings thereon, and to pay
or reimburse Agent promptly in respect of such Taxes (including for Taxes
paid by Indemnitee as Authorized Expenses hereunder).
11. Subrogation. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
the Corporation effectively to bring suit to enforce such rights.
12. Non-Exclusivity of Rights. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Restated
Certificate of Incorporation or By-Laws, agreement, vote of stockholders or
directors, or otherwise, both as to action in his official capacity and as
to action in another capacity while holding office.
13. Survival of Rights.
(a) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of
the Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to
the benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
14. Separability. Each of the provisions of this Agreement is a separate and
distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify
Agent to the fullest extent provided by the By-Laws, the Code or any other
applicable law.
<PAGE> 8
15. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
16. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
17. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement.
Only one such counterpart need be produced to evidence the existence of this
Agreement.
18. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
19. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given
(i) upon delivery, if delivered by hand to the party to whom such
communication was directed or (ii) upon the third business day after the
date on which such communication was mailed, if mailed by certified or
registered mail with postage prepaid:
(a) If to Agent, at the address indicated on the signature page hereof.
(b) If to the Corporation, to:
Exabyte Corporation
1685 38th Street
Boulder, CO 80301
or to such other address as may have been furnished to Agent by the
Corporation.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be duly
executed and signed as of the day and year first above written.
EXABYTE CORPORATION
By:_______________________________________________
AGENT
__________________________________________________
Exhibit 10.21 - 1994 OFFICER BONUS PLAN
The Company has adopted a 1995 Officer Bonus Plan under which all executive
officers are awarded cash bonuses based on the Company's operating results.
The respective bonus payments are calculated with reference to the actual
pre-tax income (and revenue for the Senior Vice President of Worldwide Sales
and Marketing) results as measured against the 1995 Operating Plan presented
and approved at the Board of Directors meeting on February 3, 1995. The
pre-tax income level is measured prior to any accruals reflecting the
Company's bonus payments. The pre-tax income bonus payments are calculated
on a linear basis and are not capped at the "on-plan" level. Revenue
commissions are calculated at .04% of annual revenue without regard to a cap.
Payment of the pre-tax income bonuses are payable in February 1996 and
payment of the revenue commissions is made monthly at the above rate upon the
qualification of the revenue amount.
FIRST AMENDMENT OF
VAIL/STEAMBOAT 8MM MECHANICAL COMPONENTS SUPPLY AGREEMENT
THIS FIRST AMENDMENT ("First Amendment"), made as of the 1st day of April,
1994, among Sony Corporation ("Seller"), a Japanese corporation, having its
principal place of business at 7 35 Kitashinagawa 6 chome, Shinagawa ku, Tokyo
141, Japan, Nihon Exabyte Corporation ("Buyer"), a Japanese corporation, having
its principal place of business at Kioicho TBR Building 1214, 5 7 Koujimachi,
Chiyoda ku, Tokyo 102, Japan and Exabyte Corporation ("Exabyte"), a Delaware
corporation, having its principal place of business at 1685 38th Street,
Boulder, Colorado 80301, U.S.A.,
W I T N E S S E T H:
WHEREAS, the parties hereto entered into the Vail/Steamboat 8MM Mechanical
Components Supply Agreement (the "Agreement") on the 1st day of January, 1992,
for the sale and purchase of certain component products identified by model
numbers "EVU 350" and "EVU 370" respectively; and
WHEREAS, the parties hereto wish to amend the Agreement upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the above recitals and of the mutual
promises provided below, the parties hereto agree as follows:
1. (1) Sub-paragraph 1(a), Item 4) shall be replaced with the following:
"4) EVU 370, 371 and 372 Subassemblies as described in and qualified by
the specifications set forth in Exhibit A attached hereto and made a part
hereof ("EVU 370 Subassembly" shall refer to the EVU 370 Subassembly
individually and "EVU 370 Series Subassemblies" shall refer to the EVU 370,
371 and 372 Subassemblies collectively)."
(2) The following new Items 5) and 6) shall be added immediately after
Item 4) of Sub-paragraph 1(a):
"5) EVU 360 series Subassembly as described in and qualified by the
specifications set forth in Exhibit A attached hereto and made a part hereof
("EVU 360 Subassembly").
6) EVU 390 series Subassembly as described in and qualified by the
specifications set forth in Exhibit A attached hereto and made a part hereof
("EVU 390 Subassembly")."
2. Sub-paragraph 1(b) of the Agreement shall be deleted in its entirety and
the following new Sub-paragraph 1(b) shall be substituted in lieu thereof:
" (b) The parties hereto agree that Sony will purchase from such
companies as identified in Exhibit C attached hereto ("Suppliers") such
components as identified in Exhibit C attached hereto ("Components").
Components purchased pursuant to this Sub-paragraph 1(b) shall be used
exclusively by Sony in the manufacture of the Products for sale to Buyer.
Terms and conditions for sale and purchase of Components shall be separately
agreed upon between Sony and Supplier in writing; provided, however, that
Buyer and Exabyte agree to the terms and conditions specified in Appendix I
attached hereto, with respect to Components purchased by Sony thereunder.
Notwithstanding any provisions herein contained to the contrary, under no
circumstances shall Sony be liable or responsible for any design defect in
Components supplied by Supplier or any defect in the Products or any other
equipment as caused thereby, nor shall Sony be liable or responsible for any
claim of third party involving the Components."
3. Based upon the provision of the fourth (4th) sentence of Sub paragraph
1(c), the parties hereto discussed and agreed that, for additional three (3)
years from the expiration date of initial three (3) year period of the
Agreement, Sony would not sell any Product and drum assemblies, full erase
heads, SSV boards and SPR/SIC boards unique to the Products (the "Exclusive
Products"). It is expressly acknowledged and agreed by Buyer and Exabyte
that, after expiration of the initial three (3) year period of the Agreement,
Sony may sell to third parties any product other than (i) Exclusive Products
and (ii) products which incorporate any proprietary technology owned
exclusively by Exabyte and not licensed by Exabyte to Sony, for any
application.
4. The paragraph heading of Paragraph 4 shall be changed to read as "Price,
Minimum Purchase and Payment".
5. Sub paragraph 4(a) shall be deleted in its entirety and the following
new Sub-paragraph 4(a) shall be substituted in lieu thereof:
" (a) The prices for the Products shall be separately agreed upon
between the parties hereto in writing on an quarterly basis. By no later than
the last day of each quarterly period respectively commencing on January 1,
April 1, July 1 and October 1 (the "Quarterly Period"), Sony and Buyer shall
meet to determine the prices of the Products applicable to the immediately
succeeding Quarterly Period. In the event that Sony and Buyer do not reach
the agreement with respect to the prices of the Products for a Quarterly
Period by the end of the immediately preceding Quarterly Period, the former
prices been applicable to the immediately preceding Quarterly Period shall
apply to the purchase of the Products during such Quarterly Period."
6. The following new Sub paragraph 4(d) shall be added to the Paragraph 4:
" (d) Buyer agrees to use its best effort to purchase from Seller the
aggregate quota of such model(s) of the Products as set forth in Exhibit G
attached hereto and made a part hereof for each annual period also set forth
in such Exhibit G, exceeding the minimums as also set forth in such Exhibit G."
7. The following sentence shall be added to the end of Sub paragraph 9(d):
"Also, Sony shall not warrant and have no liability or obligation to
Buyer with respect to defect in the Products caused by reason of (i) improper
design of Components purchased from Supplier and incorporated in such Products
or (ii) connection or incorporation of such Components with the Products in a
manner directed by Buyer or Exabyte."
8. The fourth (4th) sentence of Paragraph 10 shall be changed to read as
follows:
"Sony shall not indemnify Buyer and/or Exabyte against and shall not hold
them harmless from any other claims or actions including, but not limited to,
a claim involving any Product manufactured in accordance with Buyer's or
Exabyte's specifications or manufactured by a process specified by Buyer or
Exabyte, a claim involving any Product altered or modified after Delivery to
Buyer hereunder, a claim involving Components supplied by Supplier or the use
thereof, or a claim involving any combination of the Product with other
equipment or parts to form an allegedly infringing system or product."
9. Notwithstanding the provision of Sub paragraph 11(a) of the Agreement,
Initial Term defined in the Agreement shall be extended until March 31, 1998.
10. Appendix I of the Agreement shall be deleted in its entirety and new
Appendix I attached hereto shall be substituted in lieu thereof.
11. Exhibit A and Exhibit C attached hereto shall be added to the
corresponding Exhibit A and Exhibit C of the Agreement respectively.
12. Exhibit G of the Agreement shall be deleted in its entirety and the
following new Exhibit G shall be substituted in lieu thereof.
13. Except as specifically amended hereby, any and all provisions of the
Agreement shall remain in full force and effect and are hereby ratified and
confirmed.
14. This First Amendment shall become effective as of the date first above
written.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as
of the date and year first above written.
Seller: Buyer:
SONY CORPORATION NIHON EXABYTE CORPORATION
By:/s/ Hideki Komiyama By:/s/ Hisahiro Endo
(Authorized Signature) (Authorized Signature)
Hideki Komiyama Hisahiro Endo
(Print Name) (Print Name)
Sr. Vice President, Component Company Representative Director
(Title) (Title)
Exabyte:
EXABYTE CORPORATION
By:/s/ David L. Riegel
(Authorized Signature)
David L. Riegel
(Print Name)
Sr. Vice President of Operations
(Title)
Exhibit 22.1 - LIST OF SUBSIDIARIES
1. Exabyte FSC Ltd.
2. Nihon Exabyte Corporation
3. Exabyte (Scotland) Ltd.
4. Exabyte (Europe) B.V.
5. Exabyte Texas Corporation
6. Exabyte Magnetics GmbH
Exhibit 24.0 - CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Nos. 33-33414 and
33-42182) of Exabyte Corporation of our report dated January 17, 1995 appearing
on page 35 of this Form 10-K.
PRICE WATERHOUSE LLP
Boulder, Colorado
March 17, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1994 AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 46,233
<SECURITIES> 34,111
<RECEIVABLES> 69,394
<ALLOWANCES> 4,454
<INVENTORY> 48,236
<CURRENT-ASSETS> 203,599
<PP&E> 67,513
<DEPRECIATION> 38,347
<TOTAL-ASSETS> 242,765
<CURRENT-LIABILITIES> 45,621
<BONDS> 0
<COMMON> 22
0
0
<OTHER-SE> 196,885
<TOTAL-LIABILITY-AND-EQUITY> 242,765
<SALES> 381,844
<TOTAL-REVENUES> 381,844
<CGS> 257,365
<TOTAL-COSTS> 257,365
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,442
<INTEREST-EXPENSE> 156
<INCOME-PRETAX> 47,805
<INCOME-TAX> 15,400
<INCOME-CONTINUING> 32,405
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,405
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 0
</TABLE>
